November 6, 2014
Transatlantic Interests in the Asia Pacific in 2025

Welcome: Barry Pavel, Vice President and Director,
Brent Scowcroft Center on International Security, Atlantic Council

Scene Setter: The United States' and Europe's Relationship with Asia
Speaker: Helena Sangeland, Deputy Director General and Head, Department for Asia and the Pacific Region, Ministry for Foreign Affairs of Sweden
Moderator: Fran Burwell, Vice President and Director, Transatlantic Relations Program, Atlantic Council

Keynote: The Rise of China – The True Game Changer
Speaker: Geoff Dyer, Author, The Contest of the Century: The New Era of Competition with China—and How America Can Win; Journalist, Financial Times
Moderator: Roger Cliff, Nonresident Senior Fellow, Brent Scowcroft Center on International Security, Atlantic Council

Outlook to 2025: The Transatlantic Partnership in Asia
Speakers:
Hans-Christian Hagman,
Director of Strategic Analysis, Government Offices of Sweden;
Kathleen Hicks, Senior Vice President; Henry A. Kissinger Chair; Director, International Security Program, CSIS;
Leo Michel, Distinguished Research Fellow, Institute for National Strategic Studies, National Defense University;
Shuja Nawaz, Director, South Asia Center,
Atlantic Council

Moderator:
Mathew Burrows, Director, Strategic Foresight Initiative, Brent Scowcroft Center on International Security, Atlantic Council

Location: 1030 15th Street, NW, 12th Floor (West Tower), Washington, D.C.
Time: 9:00 a.m. EDT
Date: Tuesday, October 7, 2014
Transcript by
Federal News Service
Washington, D.C.

BARRY PAVEL: Good morning, everyone. Why don't we get started? We were waiting for our last few participants to arrive, and I – now the – now we're – now we're there.

I'm Barry Pavel. I'm the vice president and director of the Brent Scowcroft Center here at the Atlantic Council, and thank you very much for coming for this workshop on "Transatlantic Interests in the Asia Pacific in 2025."

This should be a really interesting discussion. We were just chatting, and I don't think there's too many discussions in Washington on sort of all three regions and their intersection of interests, policies and other issues. So we're really looking forward to the – to this day. We have a fantastic line-up of speakers. I'd particularly like to thank our Swedish partners, including my longtime colleague Hans-Christian Hagman, for joining us today all the way from Sweden, as – and as well as his other colleagues on the delegation.

This is another workshop in a sustained series of events and analyses over a number of issues in the – in this partnership. This is the third workshop this year on this particular project. Over the last year we've brought together experts, government officials, private sector to discuss a wide range of issues in this space. We've looked at robotics and the future workforce. We've looked at implications of global trends for the U.S. and Europe, at the trans-Atlantic implications of the QDR, and most recently the impacts of the shale revolution. And we have a couple experts here to even address those issues.

We're drilling down this year into the specifics of the trans-Atlantic partnership to better understand, in particular, in light of new concerns in Europe regarding security and the Ukraine crisis, how can this partnership be sustained in a way that helps to secure a more prosperous and stable future.

So today we will discuss the rise of Asia and its new role in the coming decades, its strategic influence and its importance to the trans-Atlantic relationship – again, not a geometry that I see a lot of in Washington.

So you see some key questions on the agenda. I won't go through those in detail. We spent quite a bit of time trying to make sure that those are among the better guiding questions for each of the discussions that we'll work through today. But I think the key is how does the rise of Asia, which certainly is already leading to a realignment of power relationships in the international political system, economic system, security system – how can the U.S. and Europe work together with our Asian partners, with our Asian allies and with others to best move forward?

We always at the Atlantic Council start with a premise from the U.S. Global Trends 2030 document and a particularly relevant phrase there, where it said we are seeing a restoration of Asia's weight in the global economy. In addition, we're certainly witnessing clear political shifts and also diffusion of power to nonstate actors, and what we seeing in Hong Kong today is an example of that.

So what does all this mean for how the U.S. and Europe can work with Asia to build the future that we're seeking? Again, I won't go through the agenda in detail, but a couple of quick highlights. We have Helena Sangeland in the first panel. I'm very much looking forward to her and Fran Burwell discussing very broad issues regarding the relevant relationships; an excellent keynote after that, with Geoff Dyer, moderated by Roger Cliff; following that, an outlook to 2025 with a number of stellar speakers covering a wide range of very specific and relevant issues, moderated by Mat Burrows.

Kurt Campbell will come and talk over lunch – he was here yesterday, so this is twice in two days for Kurt – about his views on all these issues, moderated by Executive Vice President of the Atlantic Council Damon Wilson.

Then we'll turn to trade with a number of excellent speakers, and then we'll end the day with some thoughts on whatever the new model of great power relations can be construed to be, again with some very excellent speakers.

I think without further ado I'll turn the floor to our first moderator, Fran Burwell. She's vice president also at the Atlantic Council and director of the council's Transatlantic Relations Program, as well as Ms. Helena Sangeland, who is the deputy director general and head of the Department for Asia and the Pacific Region in the Swedish Ministry of Foreign Affairs. They'll set the scene for the current state of relations between Asia and the West.

Fran?

FRAN BURWELL: Thanks very much. Thanks very much, Barry.

Let me add to your thanks to the Swedish government and also thank my colleagues at the Strategic Foresight Initiative. Since I've spending a lot of time looking at the very immediate questions of the European Commission hearings in Brussels, it's a pleasure to be here and to talk about something past this week's horizon. (Chuckles.) So thank you very much for that.

A year ago I was sitting in the office of a U.S. ambassador in a Central European country, and we were talking about the U.S. pivot to Asia and the reaction in Europe to that pivot, both positive and negative. And we talked about whether there was a real cost for Europe in this, and the conclusion that he drew was that Europe should pivot with us and should come to Asia with us. And I think that one of the questions that arise from that are – well, first off, there are lots of questions about the word "pivot," of – applying to both the United States and to Europe, but also do we have the same instruments with which to pivot? Do we have the same interests in a pivot?

But since that conversation and today, we also have the collision of reality. We have Ukraine. We have Syria. We have ISIL and the issue of foreign fighters, which has become very large in Europe. And so one of the things that I think is certainly on the agenda is whether we have the bandwidth to pivot, not just in Europe but here.

But this conference is looking out to 2025, which means that we get to focus on more of the underlying trends. I – but I do think that we should ask ourselves, as we look forward to talking about U.S.-European cooperation, as to whether we will see a continuation of crises and which crises may erupt in Asia as well that could then require some of our immediate bandwidth.

When you look forward to 2025, as a nonexpert on Asia, what I always see, when I try to look at trends and extrapolate further, is that the biggest trend is change: economic growth, political and economic alliances shifting, and political pressures, political cohesion within countries. I would go back to the 2030 report – 2025 report and the empowerment of individuals, which we see in the streets of Hong Kong right now.

One portent of change that we are looking at right now here in Washington is the Trans-Pacific Partnership, and that is close to conclusion. We hope that there will be movement on trade promotion authority that will allow that to move forward. But I would be remiss if I did not point out the report that we recently did on Latin America and the Trans-Pacific Partnership and what that might mean over the long term for economic relations across the Pacific.

But to discuss these issues in more depth and to bring a real expert perspective to this today we have Ambassador Helena Sangeland, deputy director general of the Swedish Foreign Ministry and head of their Department for Asia and Pacific. She also is the former ambassador to Malaysia.

Barry mentioned the questions that are here, and we are the scene-setter in this conversation. These questions, I think, are excellent and set out the core issues that we need to address in order to have some good assumptions.

But let me add two things to the mix. One is, what are the common U.S. and European interests in Asia-Pacific? When you ask about that, there are really two levels of interests that we could be talking about. One is the more longer-term systemic interests that we have in creating frameworks, relationships, et cetera, in that region of the world. The other one is the more immediate interests. What are our immediate concerns, and how do they interact with these longer-term interests?

The other – and this is something that I have found repeatedly in looking at U.S.-Europe cooperation on whatever issue is the issue of the day – is whether there is a possibility for working together even if your long-term ambitions are quite different or at least moderately different. Are there immediate things that we can do, even if we may not agree on the underlying trends in the region or where we think things are going? Are there things that we can do to push as far as we agree together?

So let me add those questions to the list of questions, and with that, let me turn it over to Ambassador Sangeland. Helena?

HELENA SANGELAND: Thank you very much, Fran. You're posing a lot of questions, a lot of very important questions, and I will try to answer some of them today.

I'm really pleased to be here. It's the first time I'm in Washington in my current capacity, heading the Asia-Pacific Department in Stockholm, and I have been doing so for three years.

Now our administration is a bit different, so I'll just explain that our Asia-Pacific Department covers everything from South Asia, Afghanistan, Pakistan, Korean Peninsula and out to Fiji. So it's quite a big area, and there's 23 people doing it in the Swedish Ministry for Foreign Affairs.

I have two China desk officers, just to put things into perspective.

Well – but it is a real pleasure to be here, because in Washington Asia-Pacific looms large. There are a lot of think tanks, lot of policymakers. I've had meetings at the White House. I've had meetings in the State Department and hope to go to Pentagon as well, and it's always interesting to talk about Asia-Pacific affairs here in Washington.

It's also my first time to do an Atlantic Council event, and I think I speak on behalf of all of my Swedish colleagues who are there that we are very much looking forward to this day and to be exchanging views on Asia-Pacific with you all.

Now let me say at the onset that I will make this brief presentation based on the assumption that we actually do have common interest in Asia-Pacific. I think we seem to take this for granted, but it's still worth highlighting. And this commonality of interests arises from deep and comprehensive relations, economic interests and shared values, and I'll come back to the importance of shared values a bit further on.

Now as power shifts to the Asia-Pacific region, we have shared stake in its successful development, integration into the global system. And we saw new figures just the other week, I think, where we saw that Chinese economy now supersedes the American economy in purchasing power parity.

And I spoke to an Indian interlocutor last week, and he said that, well, he was very worried about the Chinese economic rise, because that was to the detriment of India, and his point of departure was that China will pose more of threat if economically stronger. Now we don't subscribe to that. Sweden's point of view is that Chinese growing economy and India's, for that matter, will enable millions of people to leave poverty, middle class to grow and to allow these two giants to develop fast. And the stability of this region relies on its capacity to grow and to redistribute wealth, and the region's economic performance is central to the prosperity of both EU and U.S.

I – for those of you who are not familiar with the EU, maybe I might highlight some figures. Asia has now surpassed NAFTA as – to become EU's main trading partner, and our trade with Asia accounts for one-third of total trade, and it's growing. China is EU's biggest trading partner today and in terms of investments more than 25 percent of EU outward investments go to Asia, and incoming, inward investments are growing fast. So Asia matters to Europe, and we have four of our strategic partners in Asia.

But Europe also matters to Asia. Asia's future growth depends on access to Europe's markets, and the EU and its member states remain the largest development aid donors, with a round 53 billion euro per year.

It's safe to say that the global order, as we know it from '91, has changed. We are going from a post-Cold War order to an unknown, which is disorderly. And China's weight is going – but it's not matched by its willingness to take on responsibility for the global good.

I hear in Asia, when I travel, a lot of uncertainty also about the engagement of the U.S. in the Asia-Pacific and, when U.S. engages, how effective is it.

Another source of uncertainty is now the – about the viability of the established international norms which arose from the Ukraine crisis, where most Asian countries were caught in between recognizing the breach of international law but not keen to sever links with Russia, and that was really geopolitics at play.

This is maybe the most disconcerting development. We see China swerving – and Russia, for that matter, as well, but I will focus on China – and we see China swerving away from universally recognized fundamental human rights, international law, trade liberalization, and it's setting up its own forums. We have the BRICS Development Bank, the Shanghai cooperation forum, the recently held Conference on Interaction and Confidence-Building Measures in Asia, and more. And we hear of China speaking on democracy on Asian terms, and what's happening in Hong Kong is quite – is a reflection of that.

So its perceptions on democracy, international norms is changing very fast. I'm not ready to subscribe to the idea or the notion that the 21st century is one of China, nor is it of India, for that matter, but of Asia as a whole. And Southeast Asia must not be brought into – it must be brought into the (occasion/equation ?), although it's some time ago that we heard about ASEAN being the driver – driving seat of anything. And I think that we can do a lot together to support Southeast Asian countries, ASEAN as an institution, and with these country (sic), we don't only share economic interests but also shared values, Indonesia being a prime example of that.

EU and the U.S. share a significant interest in the regional security and stability in – of Asia, and there are many hot spots, potential, for tensions there. There's the Korean Peninsula. We have the Taiwan Strait still. And in this context, since South Asia is also within my purview, I would like to add Afghanistan and Pakistan to that list, which – all these hot spots have the propensity to shake the region and continue to demand – command our attention.

The European Union is – and this you know – unlike the U.S., not an Asian power. We are an Asian partner, and we would like to think that we are an Asian superpartner, at that.

American continued presence is sought after in Asia for those – particularly by those who wish to balance China's growing influence.

It's no secret that the EU is not considered, other than as an economic partner, and some would say that it's a very weak economic partner, at that, although I'd like to argue that the European economy is faring much better now and will continue to do so as we take on structural reforms.

Nor our – is Europe perceived as a net security provider to the region, and these are the – these are challenges that the new European Commission, which is now being put into place, and the high – new high representative will have to work out.

However – and this may not be known to all of you – there are security assets that EU brings to the table in Asia. We are working on – and we have effective capacity-building. We have comprehensive assistance programs. Sweden is, for instance, increasing its development cooperation with Afghanistan, as – has committed for 10 years ahead to Afghanistan's development, and Sweden has also had troops on the ground since 1991.

The EU can play an effective role on issues such as maritime security, counterproliferation, counterterrorism and cybersecurity. It has played a role in Aceh, Mindanao, Myanmar, or Burma, as you still say here, and EU has diplomatic relations in North Korea, and Sweden has had an embassy there for quite some time now.

And we have a contribution to hard power in the form of arms sales or in the form of denial of arms sales, as we have an arms embargo against China.

Many Asian (sic) expect and want Europe to uphold norms and values in dealing with China. So that falls not only on the U.S. but also on Europe.

And for instance, these expectations come to the fore every now and then. Next week we will have a very important summit. It's the Europe-Asia Meeting, which has a summit in Milan, in – and where we have many heads of state and government – actually, from 49 countries – coming. On top of that, the chair has invited President Poroshenko to this meeting. So we'll have both Putin, General Prayuth and Poroshenko at this meeting. And I think that will be very interesting. But here, we are – and I will be in the chair of the senior official's meeting. We are preparing the outcome documents.

And no doubt, during the meeting there will be discussions on sensitive issues, on Ukraine, on South China Sea, maritime security. Now, the Chinese delegation and my counterpart, she is very adamant that no mention be made of South China Sea at all. It's not a matter for this meeting. It's not a matter for Europe. It's just a matter for the – for the coastal states there. So – but there are other countries on the other hand who'd like us to mention South China Sea in particular.

Now, we have a number of instruments in place. I think, Fran, you were a bit touching on that and how we can work together. We can closely cooperate in international fora – for instance, in WTO, G-20. And I must say that the TTIP has given new momentum to China's interests in strengthening economic ties with Europe. We are negotiating an investment agreement right now.

And President Xi was in Europe in April. And he proposed a free trade agreement between the EU and China. And this is a radical change in China's policy, brought – prompted by TTIP and TPP, which together when they are in place would cover two-thirds of global trade. And that's really important for creating norms and standards and conductions for investments, intellectual property rights.

Coordinated messaging is something we can also do together and we have done on human rights issues, for instance. This is a very difficult area to work in. And coordinated messages is always helpful. And we can also have joint messaging on peace and security, joint messages on DPRK and counter-proliferation, for instance. We can agree on principles to underpin our respective efforts to enhance regional, maritime security and support freedom of navigation.

We can work on cyber issues together, Internet governance and so forth. And in the area of development cooperation, we can identify opportunities, we can do burden sharing and cooperate. And it's important that – for those of you who have been working in development countries, it's important the donors don't crowd each other out but cooperate and do joint programming.

Joint statements is also a way of working together. We saw the Ashton-Clinton statement from 2012, of which I think Kurt Campbell and some others were the main architects – and I look forward to meeting him later today. We can share best practices, we can show up at international, regional fora. And we can ideally have Asia-Pacific items when our leaders get together, and particularly when the secretary of state and the new high representative vice president will get together.

So there are also strong foundations of working – or cooperating on working level. And we can ensure regular coordination locally between EU delegation, EU member states and the American embassy. And last on my list is the track two fora, which are also important. We have for many years now had the Stockholm-China forum, which might be familiar to some of you. And this is a forum where we bring experts, academics, policymakers together, where we exchange notes on how we see developments in Asia.

So just to summarize, Europe and the U.S. can definitely work more together on the Asia-Pacific. We have shared interests, but different approaches. And I think we – it's important that when we – when we work and when we work together, we can strive to make those approaches complementary. Thank you very much.

MS. BURWELL: Thank you very much. Thanks for that excellent overview, which I think has really set the scene and given a Washington audience some insights into the way the EU and Sweden reaches out to this very important region. And I want to go back to what you said about the actual state of the economies with Asia now supplanting NAFTA. And I think in terms of that, I believe that the real G-2 is not the U.S. and China, but the stronger economic relationship right now is the EU and China. It's not hugely stronger, but it is statistically so. So – and I think that's something that we should keep in mind.

The one thing in looking at the economic statistics last night that I found to be radically different was that there seems to be much more U.S. investment in China than there is European investment in China, but the growth rates are quite different. And I would also point out that this is – it is not simply a matter of European and U.S. investment in China, but China in particular has used the opportunity of the European financial crisis to pick up some good investments as countries like Greece and Portugal get rid of state-owned assets in the energy field, in the transportation field, the Piraeus, for example, with benefits for the home country as well.

But I think when we talk about these strong economies and then we look forward, we have to ask a couple of things. First, does this economic partnership lead to a more strategic partnership between Europe, the U.S. and Asia? And Asia is so divided as well. I mean, in some cases it's a balancing act between China and the rest. And we are part of that balance.

But when we talk about TTIP, for example, we talk a lot about the values behind it. And we talk about it as the economic manifestation of a long-term values-driven partnership. We don't use that same kind of language when talking about the EU-China investment treaty – investment negotiations. Or sometimes we use it with TPP, but China's not part of that. So in some cases it's seen as being an anti-Chinese issue.

And does this economic power that Asia has and that is growing, what kinds of actual influence does it lead to? Is it just an accumulation of GDP, et cetera, or is something that becomes more operational as we look forward in the foreign policy field? And that brings us to the question of how stable is the Asian – are the Asian economies? What happens when China goes off the demographic cliff? If we're looking in this session – if we're setting the scene for 2025, what are the things that we should be looking for in terms of the Asian economies not pursuing a fairly straight trend line? And what would that impact be in both the U.S. and in Europe?

I want to also underscore, and I think that you did this as well when you talked about perceptions, that this is not just a one-way thing. We often think about the U.S. and Europe influencing Asia. But as I mentioned about Chinese investment, which is now a big player in Europe – or becoming rapidly a big player – there also is a big factor in terms of how we are perceived. You mentioned that the EU is perceived as an economic partner, but not as a security provider.

So when we talk about U.S.-European partnership, does it matter? Is our partnership economic in the region or are there security issues that can be addressed jointly as well such, as you mentioned, maritime security, and I would say that in some cases counterterrorism and counter-proliferation as well? But I do think that we need to be aware or address over the long-term, does the Europe – does the Asian view of Europe change if there's more maritime security in the region to becoming a security provider of some sort.

Let me also put two other issues on the table, and then I want to turn to Roger Cliff who has been leading this effort at the Atlantic Council for some comments. But you mentioned the alterative views and systems put forward by China. And what are the – what are the things that China is developing because it's more hesitant now about being integrated into global norms, as we see them? And what are the long-term implications for that? Are we talking about a rival swift, for example, where all our foreign transactions are conducted and which we have used for looking at counterterrorist financing and tracking organized crime as well?

And then we have the big question mark sitting in the middle of much of the Asian continent, and that is Russia. We have now seen a less-cooperative Russia, to put it mildly. And yet, the area of Russia that is in much of Asia is relatively empty in terms of population, but very rich in terms of resources. And this is a country that is facing a rather dark-looking economic future, I would say. We have seen huge amounts of capital flight, not only before the sanctions came on and now since the sanctions came on, we're seeing companies being forced to pull out of major investments in the Arctic and in oil exploration. What will be the impact on Russia and how does that redound to its neighbors, particularly China? But is this big land mass simply not a player in Asia, and I think that's one of the things that as we look forward to 2025, we should have in mind.

With that, what I'd like to do is I'm going to turn to Roger for a few comments. I'd like to collect some more comments – I'm going to come back to you either mid-way or towards the end for responses, but I really want to generate some comments from the audience. If you're in the back, catch my eye. If you're at the table and you – and I fail to see you when you try to catch my eye, this is an excellent way to show me that you have something that you'd like to say. And I'd invite both comments and questions for Helena.

So Roger, can I turn to you?

ROGER CLIFF: Thanks for this opportunity. Originally, we planned to have Evan Medeiros (sp) speak now, and those of you who've met Evan know I don't look anything like him so I'm obviously not Evan, nor could I do what he could do, which would be to speak for the U.S. government, so I'd just like to give a few comments of my own from an American perspective on the EU relationship with Asia and how it may converge or differ with that of the U.S.

And going back to Fran's framework at the very beginning in terms of long-term interests and short-term interests, I actually think the long-term interests of the U.S. and the EU and Asia are the same. We both desire a country that – a region that is democratizing, that is democratic in the long run. We both desire free and open access for trade investment and human-to-human interactions. And neither of us would like to see a region that was dominated by a single hegemonic power that tried to dictate the policies of other countries in the region.

So I think – and along with democracy, I would also add human rights as well. We both have an interest in seeing a region where human rights are upheld and promoted. So I think our long-term interests are very much the same. I think some of the differences are more in the short term and perhaps more in perception, actually, than in reality.

In the U.S., there is a debate, I guess, between what the U.S. position ought to be on – in particular, on the topic of the next panel, which is The Rise of China; does China's growing military power actually threaten the United States, or is it something that we can accommodate and really shouldn't worry about?

And my – and my feeling is that China does not represent a direct threat to the United States, and in that regard, I think we're very similar to Europe. We – neither region is directly threatened by China. The difference has to do with the U.S. security commitments in the region.

The U.S. has security commitments to countries that are threatened by China's military power, and I think that's maybe an important difference, particularly in the – in the short term. And one of the areas in which that is likely to play out is, in particular, concerns about Chinese access to militarily significant technologies, and a – and a lot of members of the Swedish delegation actually recognize me because I appeared on Swedish television a few weeks ago because Swedish television had discovered that a – the Swedish defense ministry's research agency was planning on transferring to China some software that can be used in the modeling of the air flows around aircraft and missiles and that sort of thing. And I think this is an example of an instance where U.S. and European perceptions are probably different, and particularly perceptions – the U.S., we are very sensitive about any kind of transfers of dual-use technology to China, and American companies get in trouble on a regular basis for getting caught doing that.

In Europe, the – particularly in the dual-use area, the concern is not nearly as acute, and it's not been a major source of friction between the U.S. and the EU to date. There was a movement a few years ago among some of the EU countries to try to lift the EU's export ban against China or to replace it with a code of conduct. And I think the EU was a little bit surprised by the intensity of the reaction in the U.S. to that proposal, and in the end, it didn't – it was not implemented. But I think that's an example of a(n) area where, again, I think it's more a perception of security concerns than a real difference.

I thought I was going to be asked to talk a little bit about the U.S. pivot to Asia, so if you don't mind, if that's OK, I'd like to say a couple of things on that. And at least in my world, the question of the U.S. pivot to Asia, or rebalance to Asia as the government prefers to say, usually comes up in the context of people questioning whether there is any substance to it. And I think there certainly has been substance to it, and it hasn't just been in the military realm, as was pointed out at an event yesterday, we have a president who, unlike his predecessor, has made it a priority to regularly attend meetings of the – such as the East Asia Summit and so on, we have appointed an ambassador to ASEAN as a whole, something that didn't exist before, we have the Transpacific Partnership.

The – some people say well, the pivot has mainly been manifested in the military dimension. I would – I on the other hand have not been terribly impressed by the military dimension of that. A lot of the shifts have been fairly minor, moving one additional submarine to Guam, a couple more Aegis destroyers out of about 80 that we have to Japan. These are fairly minor shifts; I don't think putting three Global Hawks in Guam is going to scare anybody, and moving the Marines from Okinawa to Darwin seems to me a shift away from Asia, not deeper into Asia.

And I think there are – there are things in both the military and the – and the non-military realm that the U.S. could do. I think maybe on the non-military side, the most important thing would be to continue, or rather, increase our diplomatic – and that includes the military as an instrument of diplomacy – engagement with countries in the region to make sure that not just the president but other senior level diplomats are making more visits to the region, becoming engaged in more issues in the region. But as I think Fran pointed out in the beginning, that's – our bandwidth is limited.

So then the question is, well, where are we going to take these people's time away from? Is it going to be Europe, is it going to be the Middle East, is it going to be Africa? You know, these are all priority regions for the U.S. I don't think that leaves much of the world – maybe Latin America – unfortunately that hasn't been a priority for the current administration. But the fact is the United States has global interests, and so, you know, I think more can be done in that regard, but it's necessarily going to come at the expense of other regions. And so it's going to be a question of trying to squeeze out a little bit more time and attention for Asia is necessarily going to come at the expense of other regions, and all we can do is to try to minimize the negative impact of that.

On the military side, there's been a lot of focus on weapon systems. I think much more tension should be given actually to infrastructure. This is a tough sell in the U.S. When we're closing bases domestically, it's hard to convince congressmen in particular that money should be spent improving our overseas infrastructure. Many of our partners in the region have their own priorities, are not necessarily going to do it for us unless there are things that can be done in that regard.

And the last thing I'd like to say, an important opportunity has arisen with regard to Japan. Japan has just loosened its restrictions on exports of defense technology, and there's a huge opportunity here for the U.S. to cooperate with Japan in this area in a way that could benefit both countries without necessarily threatening other countries in the region.

MS. : (Off mic.)

Q: (Off mic) – to get the discussion going. Geoffrey Harris, I'm an official of the European Parliament, based here in Washington. I used to work on human rights issues in the secretariat of the European Parliament back home, so I'm familiar with that particular element of our discussion. But my question is quite different. I think you rightly said that China does not represent a direct security threat to Europe. However, Russia does. We discuss this a lot around this table and in this building. And I don't know how diplomatically to put this. China hasn't exactly been helpful in discouraging Russia from posing this threat to Europe and to the post-Cold War international order. Indeed, what is happening in Ukraine is part of this process leading towards international disorder. Is China kind of encouraging this or worried by it? How should we interpret China's role in giving apparent sustenance to Putin's actions, as well as the impact on the economy, of course?

MS. BURWELL: Could I ask you to – (inaudible) – to turn off your – thank you. Helena, can I ask you to comment on how do you see the U.S. pivot and how do you see Russia intersecting? Sweden spends a lot of time thinking about Russia, so maybe you could also think about that openly with us.

MS. SANGELAND: Yes, what's the pivot. I think Americans that I've spoken to earlier on say that don't use pivot. It's a rebalancing. Because the U.S. never went away from Asia-Pacific. And both U.S. and Europe have been there for a very long time.

I think this is – my interpretation of the American pivot is that it was a way of packaging its thinking on Asia-Pacific. It was not meant to indicate moving away from something and adding something elsewhere, but simply try to dress the – address the issues that were – that were pertinent to the U.S. And there have been some concerns in Europe about the pivot, meaning America's turning away from the U.S. Now, U.S. has been very keen – or U.S. government has been very keen to say that it's not pivoting away from Europe, and that's not necessarily the sense that we have either.

On Russia, yes, I think that this was a real – the Ukraine crisis was a real conundrum for China because it's about violating territory in a way which China does not approve. On the other hand, it has strong connections with Russia. This is a relation of convenience, not necessarily of values, and it suits China's needs, so they are – they are keen on preserving their relation with Russia as well.

So I don't think it was an easy decision for Beijing, nor was it an easy decision for several other Asian countries when they chose to abstain from voting on the resolution on Ukraine. What this has – what consequences this will have for Europe, well, you're very right, friend. This is on our doorstep. This is happening on our doorstep. This is happening in Europe. It is very disconcerting. And my – our former foreign minister, Carl Bidlt, who some of you know very well, he spent – he has spent a lot of time on this, and it continues to pose a threat and concern to Europeans, and particularly those who have – who are neighbors to Russia: Baltic states; Finland, of course. And it has also caused our – it has also meant a shift in our thinking on security strategies.

Q: I just thought that last question was a really good one, one we didn't capture on the agenda, strangely enough, for the Atlantic Council. But I think that's an important one, and it gets to sort of some comments that were discussed in Helena's initial remarks which related to values. And so we should assume, I think, that as China's power continues to rise, that it will increasingly look to exert some influence on the norms that guide international behavior across all domains, cyber, trade, maritime security. You can, you know, pick the top 10. Those in some cases make – you know, may conflict what are called transatlantic values are the values that are generally presupposed to guide the workings of those domains and have largely since the end of World War II. And how – I just wonder as someone who – as an official who focuses on Asia from Europe, how much of this is a consideration in your daily work? In what domains is it important to – most important to Sweden? And then are there mechanisms at all established for U.S.-European cooperation, you know, on those different domains regarding sort of this broader question, which I think is a medium-term trend. I mean, it's not even a long-term trend because it's happening already.

MS. BURWELL (?): Let me just add that you described Europe as a super partner of Asia, and certainly in the transatlantic context we think of partnership has having a strong link to values. We tend, in discussions of Asia, to focus a lot on China, and maybe the answers to this question are different, depending up on whether you're talking about China or other Asia countries.

MS. SANGELAND: Thank you, yes. As I said, this issue that you're bringing up is one of the most disconcerting issues. Also, the behavior of Russia challenges the way we see – look on international law, on norms and established practices. And I think we'll have to eventually accept that these norms that have been in the forefront for many decades are going to change and they're going to be challenged.

For a country like Sweden, we have 10 million people and there are several smaller member states in the European Union, we definitely rely on an international system where small countries are also respected, where territorial integrity is respected. So that's why this is so very important.

Now, on being a super partner, yes, I think for me – and I have a task to convey to my new government. I have met – not met our new foreign minister yet. She came into – she took on her position on Friday. But I must remind her – and she probably knows already – that Asia is not China. Asia is so much more. And it is – our focus must be on the – also on other countries. And I think India is a very interesting country to watch and monitor. Now Modi was here last week, I think, made a triumphant visit, as we understand it. And I think India has the propensity to become a major player in the region when it's ready to, and I think we have seen the seeds of that with Modi's new government and his new foreign policy. So Asia is not just about China, it's about all the other countries as well.

MS. BURWELL: Could I ask you to expound on that just a little bit? I mean, I can see one situation where Europe and the United States are reaching out to India, it's an excellent example, and as well as others – and of course, you spent time in Malaysia – to build networks and to build more – to reinforce their participation in the international order and adherence to the norms that we hold dear. Is that something that can be done? Is that something that we should think about more explicitly? And what would be the reaction, what would be the – over time, what would be the reaction of China? And is there a way to do this without making it anti-Chinese, to be blunt?

MS. SANGELAND: Some of us might want to chime in here, but yes, I think there is a lot we can do to reach out, and we are doing as well. The U.S. has this particularly – specially dedicated ambassador to the ASEAN, now EU has as well, so – made a decision very recently to appoint specially dedicated ambassador to ASEAN. So I think – (coughs) – excuse me – I think that there is a lot that can be done. I think that how Beijing perceives this kind of cooperation is difficult to predict. Will they see it as a threat, another way of containing China? Well, there is not much we can do about that because that has – there are domestic reasons why China acts the way it does and the way it sees containment. But it's still worthwhile pursuing what we're already doing, both the U.S. and EU, with Southeast Asian countries, for instance.

MS. BURWELL: Thank you. Let me bring in Matt Burrows, who's been leading our Strategic Foresight Initiative.

MATT BURROWS: Yeah. I want to ask, you know, the proverbial question, you know, what keeps you up at night about Asia, what in particular is a really immediate concern? Because you've outlined a couple of things about, you know, Europe's economic future is in some ways tied to Asia's, so obviously, you know, recession or drawdown in Asia is going to affect Europe; talked about South China Sea. I mean, what – I'm trying to get a sense of, you know, your kind of strategic outlook, what is the priority, what are some of the areas that you really worry about?

MS. SANGELAND: The region has been very stable and relatively calm during the last decades, but there is a lot simmering, and that could sort of explode and become very serious issues, and I'd hate to think about what would happen if there would be – the conflict would heighten in South China Sea, for instance, with all the increased amount of weapons that are in the area.

Now, of course, DPRK has always – sort of tends to keep us – keep us on our toes. We don't know when something's going to happen, when there is going to be a new test, but we know that there is going to be one. That's a safe – I think a rather safe bet. Now, Kalulov (ph), who has been our ambassador to Pyongyang for two years and just returned, may want to say something on this. So DPRK, definitely, because it's so unpredictable.

I worry and I think my minister also worries a lot about the situation for women in Afghanistan now that they're – the security concerns that – and the security concerns as a whole in Afghanistan is really troubling and the situation for women and girls, are we going to go back on that, backtrack, have to backtrack.

And on the more economic side, it doesn't keep me awake at night, but I think it keeps some companies awake at night is the limited market access in China, for instance, and that their investments are being challenged.

I think also that terrorism is something that we worry about, the – what's coming out of the fallout from the Levant, for instance. And we read reports about returnees from Syria, from the Levant, in Southeast Asian countries, in Australia. I think this is a growing concern. So there is quite a lot that keeps us on our toes.

MS. BURWELL: Perhaps I could ask Ambassador Andersen (sp), if you would give us an update from the front line, so to speak, in DPRK.

MR. : Thanks.

If you look at the short and medium term, North Korea seems to us quite stable as a state. The absence of the – of Kim Jung Un recently could change that. We haven't seen him for a while. Hopefully it's only some kind of illness he's being treated for.

But I – in my analysis, the danger with North Korea, we know that sooner or later, if there is no reason for them to avoid doing another nuclear test, they will do it, and they will test missiles, long-range, long-distance missiles, that sort of program. So we know that's in the future.

The real danger, as I see it, is not in the nuclear capacity as such, or their conventional military capacity. The real danger is in proliferation. That's what I'm most worried about. Proliferation and also some small incident that might lead to an escalation.

The North Koreans are very – they're very clever, in a sense. They are sort of Machiavellians. They know that they will not win a conventional war, so they will never start a conventional war, and they know that if they would try to use nuclear weapons, that would be the end of everything. So it's all about deterrence, and the risks are proliferation and some small escalation, incident that escalates. Thanks.

MS. BURWELL: Thank you.

We're getting very close to the time when we need to wrap up. In fact, it looks like we are right there. But I'd like to – is there a question in the back?

Q: (Off mic) – one comment. Thank you.

MS. BURWELL (?): Please identify yourself.

Q: Yes. Sarang Chidore (ph), currently with the University of Texas at Austin but formally at the think Ideas (sp) in new Delhi, where I co-led a futurist project on global security as impacts India using scenarios and so forth.

Just picking up on the India point that came earlier, there is a very interesting reaction from India on the Russia question. It is in fact much more in line with the Chinese reaction than it is with the European reaction or the reactions in the West. And I think that's something the trans-Atlantic community may want – may want to pay attention to because on values, certainly India and Russia do not have a convergent internal system of government, in some sense, at least, but there are interests that are in common. So why are so many Asian countries not seeing Russia as – in the same manner or even close is something worth looking at.

Secondly, I just want to point out to one simmering issue in Asia that seems to have gone off the radar in at least the U.S. for a while now, which is the simmering tensions that are growing between India and Pakistan. They continue to simmer. The firing incidents are slowly escalating. Talks as – have sort of stopped. They may resume. We are not sure what Modi's intention is and indeed the other side. So it's something to keep a watch on because – a crisis that can explode out of the blue, and we all must be prepared to deal with it in different ways. Thank you.

MS. BURWELL: Thank you. Let me bring in Roger Cliff to see if he has any final comments, and then I'll turn to you.

ROGER CLIFF: I just wanted to pick up on the issue of whether Asia is all about China and how do we avoid making Asia all about China. And it seems to be it gets back to the issue that we talked about in the beginning, which is what are the common interests of the European Union and the United States? And it doesn't have to be framed in a – in an anti-China way. I think we can enjoy all the benefits of cooperation without having to frame it in a specifically anti-China framework and say we ought to talk about not what we're against but what we're for. And I think that, you know, we're for democracy, we're for human rights, and there are lot of countries in Asia that share those values increasingly so today. And that's the long-term interests of the U.S. It's not so much about containing China or counterbalancing China – when I say the U.S., the U.S. and the EU. It's in seeing the expansion of countries that believe in democracy, believe in individual freedoms and protecting the rights of individuals. And that's something where the EU and the U.S. I think have common ground, and it can satisfy the strategic as well as the moral interests of both countries – both regions, sorry.

MS. BURWELL: Thank you very much. Roger has rightly brought us back to the question of making sure that this is not all about China. And we have a question about India and India-Pakistan. I would also point to, of course, that the internal issues that plague Pakistan may also be something that you'd like to talk about as well as other points that may have come up.

MS. SANGELAND: Thank you. I feel quite overwhelmed there, so many issues to discuss, and we have the whole day, I think, to come back to some of them.

Yes, on the India reaction to the Ukraine crisis, yes, that was a bit of a surprise and a disappointment, if I may say so. And why is that? I think there are economic reasons. I think there are many reasons why Delhi would not like to confront Moscow. They are part of – and I think maybe there is some anti-Western element that comes into play here as well – maybe.

Yes, India and Pakistan, yes, a long – it's been there on our radar for a long time. It's been looking good for quite a while. Now the domestic situation in Pakistan renders the country more volatile again, and democracy is challenged, or the current government is being challenged because there is talk of elections not being carried out properly, freely and fairly. So – and – so yes, definitely, this is – this is always on our radar. I didn't want to pinpoint that in particular because there are many other issues as well, but definitely.

I think that it is a – I'm surprised that when I travel to Pakistan, the main concern is India. Pakistan has so many other things to worry about domestically but also with Afghanistan as a neighboring country. So yes, it's a difficult region as a whole.

MS. BURWELL: Well, we have to bring this session to a close, unfortunately, but it's time to move on. But I think that what Helena has done here – and thanks also to Roger – is to make sure that we have a very good sound understanding of the perspective of Europe and some of the other questions that have arisen so that we can start the discussions the rest of the day to talk about the impact of economics, the impact of the rise of China, the impact of some of these strategic questions of the question of what type of framework are we trying to build, or are we trying to build a framework in Asia? And how do you keep Asia from just being China? You have an enormous spread in your portfolio. And what are the consequences of what may happen with some of the external actors, such as Russia? So I look forward to seeing you all throughout the day as we delve much more deeply into many of these questions.

And I believe that we do not actually have a break. We're just going to shift to panelists. Is that right? OK. Great. Thank you very much.

MR. CLIFF: All right. Well, I apologize for you having to hear so much of me this morning, but I'll try to make my introductions and then – and mostly step out of the way. We have now very a interesting speaker. Geoff Dyer is with The Financial Times. He was in their (China ?) office for three years and then was bureau chief in Beijing from 2008 to 2011, so he has a lot of time on the ground in China. He's now on the Washington, D.C., bureau and writes about American foreign policy. But he's also just published a book called "Contest of the Century" – sorry I don't have it written down – which is a great title, by the way, but also it's obviously relevant to what we're talking about today and from the perspective of someone who's been up close and personal with China for a number of years. Other things in his background, he's – he studied at Cambridge University and also along with Ambassador Andersen (sp). He was at the Johns Hopkins School on Bologna, so you two have that in common, I found out last night, and also in Washington, D.C., where he was a Fulbright scholar. So I won't spend any more time introducing him. I will let him tell you what he's going to talk about rather than me telling you.

So – but just by way of context, you know, we've been trying to avoid talking about China, but here we are talking about China again. And that's not by accident. Obviously, China's rise is maybe the most profound event of the first half of the 21st century, and the rest of Asia is important. But this is – this is a sort of a once-in-a-lifetime sea change that we are seeing, and it's going to be an ongoing challenge. It's a complicated challenge in ways that are very different from the Cold War, where – when we were dealing with the Soviet Union, we didn't have nearly the mix of cooperation and competition that we do with China. China is one of the U.S.' largest economic partners. It is now the EU's largest economic partners. It – there are over a billion people in China, many of whom are not at all interested in war with the U.S. or EU or Taiwan or any other place in the world, who have human rights that need protecting, just as in any other country. And there are – China is a much more open society than the Soviet Union was during the Cold War. And so there are many key differences, but there is one fundamental similarity, which is China is a rapidly growing military power and that has interest that conflict with those of the United States. And so we have a very complicated problem – and the (EU ?), I should keep saying – and so the United States, the EU and much of the rest of the world have a very complicated and difficult challenge in how to deal with the rise of China.

So with that as context, I'll turn it over to Geoff and let him tell you what he's going to say.

GEOFF DYER: Well, thank you very much, Roger, and to Barry, and thank you very much – (inaudible) – invitation to come here and speak today. It's a real honor, really, to be here today. And looking through the roster of speakers, it's a genuine privilege to be – to be asked to speak in such company.

And it's also a real pleasure for me to be – have the chance to sort of sit down for a morning and talk about China and Asia. As Roger mentioned, I moved here a couple of years ago from China – (inaudible) – to write more broadly about American foreign policy. And when I moved here I sort of had the vague idea that maybe I'll write about 40 percent about Asia, 40 percent about the Middle East and maybe 20 percent about the rest of the world. That was sort of my brief calculation I had in the back of my mind.

Instead, I sometimes joke that I'm going to change my business card to "Middle East correspondent" because that is essentially what I tend to do most of my days because it's the old adage about Washington being a place where the urgent pushes out the important. Well, I've learned that very crudely in my own daily life. So it's great for me to have the chance just to talk about things which are, indeed, so very important, as Roger said, which, without wishing in any way to minimize the things going in the Middle East today, are going to have much more effect on what the world looks like and on people's lives in 20 years' time, 30 years' time.

I've been asked to discuss what the broad implications are of China's rise and for the trans-Atlantic relationship. I think a good way to start is just to define briefly some of the main implications and points of what we mean by China's rise and what that's going to involve. And I don't want to dwell too much on that for – it's so – such well-known territory for – especially for a Washington audience, but it's a good way to just very quickly frame the discussion, I think.

Especially in the recent weeks and months, it's become commonplace to really almost lump Russia and China together, to talk about them in terms of these two revisionist authoritarian powers that are standing up to the West. I'm not sure that quite entirely captures the subtlety and complexity of what is going on in China. In Russia, in recent months, you've seen a very full frontal open challenging of the postwar order, a literal redrawing of borders taking front of our eyes.

The things that China are up to are much more calculated and low-key. It's a sort of stealth expansion of China's interests in the seas around it, in the East China Sea and the South China Sea. Sometimes I refer to it in terms of "salami slicing." That gives you that idea it's a very – it's a very gradual and slow-moving process. In journalistic parlance, what China is up to is a below the fold strategy. It's a series of events that don't by themselves attract a huge amount of attention in the way that marching into Crimea but which over time can have a cumulative, very important impact.

And that's where the Russian analogy is valid in a sense, is that the underlying ambition does bear something in common. It's that ultimately China is pushing in the direction of trying to forge something that might look like an old-fashioned sphere of influence in Asia. It's a complicated story, and we can talk a lot more about, you know, the ways – (inaudible) – that analogy doesn't necessarily – there are ways in which it doesn't necessarily carry. But there are lots of ways in which that's the way that China is thinking. It's thinking about Asia at the place where it's traditionally been the most influential country and wants to return to that position.

And that has huge implications. Even while, you know, China's tactics are less confrontational than Russia, it will – ultimately, it will carry a bigger punch because Russia is playing a losing hand of a struggling economy, but China is likely, if it isn't already, to become the biggest economy in the world over the next decade. And we're talking about a region, Asia-Pacific, that is the most dynamic part of the world economy. And so if China wants to slowly and surely exert much greater influence over affairs in Asia-Pacific, it would start to have much greater influence over particularly the economic and trade and business rules in this most dynamic part of the region but also over time about norms and about ideas of democracy and values that we touched on in the past panel.

In my book that Roger mentioned, I quoted one American academic who said that China is creating hairline fractures in the global order. I think that's a good – a good way to frame what China is up to. It's not a full frontal confrontation but a steady and slow chipping – steady, slow and disciplined chipping away at the global order and American's position in that.

So that in mind, I want to make three broad points about what all this means for trans-Atlantic relations. I hope that it cut cross most of the questions in the agenda. I hope that doesn't repeat too much of the ground from the previous panel. But just to really set up the three points for discussion.

I think at the general level, what this means is that, it's like the big idea of this conference is absolutely correct, that China's rise will in lots of ways push the U.S. and Europe even closer together. They will find themselves having lots of common interests as defenders of the liberal order.

But that's in the big picture. But I think when you actually bore down into it in more detail, in lots of ways and actually it will be quite hard for the U.S. and Europe to really sort of become real partners in this area. Make sense of the big picture, but when you start going down to some of the more granular detail, it becomes a bit harder.

And a third point about to throw out there is just to say that also Europe has to be very careful with this idea as well, working closely with the U.S. and Asia, it can also be a potential trap.

So the first idea that China's rise is going to reinforce the trans-Atlantic relationship, reinforce the partnership between the U.S. and Europe. And you've seen this quite clearly, I think, in statements from leaders in both the U.S. and from Europe, it was Kurt Campbell a couple years ago, when he was at the State Department, he was the first person in Washington I remember really speaking about this and really try pushing this idea. And the way he would frame it – and he's going to be here later, he can talk about it himself – but he – very vivid quote he gave a while ago where he said that the U.S. is not an anything of consequence around the world without Europe. And so it makes sense that the U.S. wants to consolidate its position in Asia, wants to pivot to Asia, it makes sense that it will look for European help to some extent in that area. And then more recently, Federica Mogherini, the new European foreign policy chief, very shortly after she took office, she said, I've always been convinced that we should pivot to Asia together, the U.S. and the EU. So there's a sort of high-level buy-in to this idea.

And it's based on this idea that we talked about in the previous panel that on the big picture level, the U.S. and Europe share very similar views of the world, similar values, similar ideas. Europeans don't necessarily always like to think of themselves as being defenders of the international order; that sounds a little bit too portentous for some Europeans. But ultimately, that's a position – one of the roles they play. They do believe in many of the same basic principles that the U.S. likes to say it's defending in Asia. They believe in freedom of navigation, defense of borders, open economies and, where possible, on democratic reform and protection of human rights. The same big themes bring the U.S. and Europe together. So the extent to which China is in some ways challenging those ideas – and it's a complicated question, I grant you – but inasmuch as China is challenging some of those big themes, it's normal that the EU and the U.S. would have a common interest in trying to defend those values, those ideas.

If you think about it, the impact of China in terms of business and economic issues, it's also very true that the U.S. and Europe share the same complaints. Many of you in this room will have heard American companies complaining about Chinese industrial policy and this sort of web of policies that China has to squeeze out foreign firms in its huge market and the strategies it has to force foreign companies to hand over technologies. You also have heard most people complaining about cybertheft of intellectual property and broader violations and patents and intellectual property.

Well, if you've heard those complaints from Americans, if you want to hear those complaints, I urge you to go and talk to the Germans because more than anyone, German industries at the current point is at the forefront of the real – the real sort of – the crux of facing that pressure from China because it has many of the very things that China wants to make at the moment, those sort of more high-end manufacturing areas that China is trying to move into. So there is a real common interest on those business economic issues.

And then more broadly in terms of global trade, there is a common interest in trying to shape the agenda at a time when China is emerging as the – as the largest economy in the world. I think of TTIP and TPP. They both have their own agendas of trying to improve efficiencies and drive growth in both regions. But there is also a common objective where both the U.S. and the EU are trying to retain their ability to keep writing the rules about trade and writing the rules about technology. The European Council on Foreign Relations framed this in a very interesting way, recent reported – the quote was, the new global standard for global telephony will not be European or American but (either ?) be trans-Atlantic, or they'll be Chinese. And that's the sort of central strategic dilemma and argument behind these big trade deals. Now, from a European and U.S. perspective, it's hugely important to try and maintain that power to keep the setting the rules and setting the standards; it's very important for manufacturing industry in both regions.

So then that's the theory, at least. That's – (inaudible) – big idea as to why the rise of China is likely in some way to pull the U.S. and the EU more closely together.

But I think we also have to be a bit careful about expecting too much from this sort of partnership. There are big limitations as well as to why – what the Europe – what Europe and the U.S. can actually achieve together in Asia. And a couple of obvious points just to bear that out.

The first one is that, you know, Europe still struggles to develop its own common foreign policy in lots of ways. Trade is one of the few areas where the big EU states have been comfortable handing over sovereignty and power to Brussels to deal on their behalf. And so it's no surprise that trade is one of the areas where you can see the beginnings of a U.S.-EU common strategy around broad trade issues. But beyond that, it's much harder for the EU to forge compositions, and that makes it much harder for it to have an effective strategy outside of its immediate area.

That was true even before the Ukraine crisis started, but that's even more true now, of course. Over the coming year, probably years, the EU is going to be bound up in dealing with Russia over the Ukraine crisis, and that's going to consume a huge amount of time and energy in Europe. That's almost inevitable. So just as it has become a truism to say in Washington that what's happening in the Middle East and the chaos in the Middle East is going to make it hard for the U.S. to pivot to Asia, the Ukraine crisis is going to make it much harder for the EU to really address a lot more attention to Asia.

Then more broadly, the Ukraine crisis raises a sort of difficult question about how – how to position yourself again – towards China. There is an argument that, given that the U.S. and Europe are going to be in this confrontation with Russia for some time, it now seems there is this argument that maybe it's not the right time to be pushing back in some way against China or even to be trying to play nicer with China. I think that's an argument that has much more resonance in Europe than it does in the U.S. That's a complete anecdotal impression. I have no scientific evidence for that. But my impression is you're going to get a lot more of that type of argument in Europe than what you'll get in the U.S.

And then more broadly, there's a very different sense of perception of the threat or the challenge or whatever you want to call it that China does present to Europe and to the U.S. Roger mentioned earlier that, you know, China's not a direct military threat to either region. But what the Chinese military is a threat to, it's precisely designed, in lots of ways, to attack American ships and American bases in the Asia-Pacific, but Europe by and large doesn't have that direct military presence. It doesn't have, apart from the British and the French, doesn't really have a great deal of footprint on the ground, and even for those countries it's very small.

That specific military threat that China does represent to the U.S. concentrates the mind in a way that simply isn't the case for Europe. And so I experienced that in some degree when I launched my book about China, where the first section is all about the Chinese navy and the broader implications of what that means for geopolitics and the balance of power in Asia. And some people in Washington agreed, some people disagreed, but no one thought that I was raising issues that weren't of central importance. But in Europe I got a lot more quizzical reaction: you know, a lot of people asking why it is I was writing about navies; it seems a very 19th century idea; is this really the sort of thing you should be focusing a book on?

And I think even it goes more broadly than that. I think this whole idea of Chinese modernity, the idea that China is a sort of alternative to Western ideas and Western philosophies and Western values, Western design, Western art, that whole idea that really sort of picked up in the mid-2000s for the big Chinese soft-power push, I think that lost a lot of traction in the U.S., but in some parts of Europe that still has some support. There are still people who are prepared to embrace that idea or to encourage that sort of idea.

Then I think we also have to say that – point out that China has been quite good and effective at playing the Europeans off against each other. Again, you know, it's become commonplace in Washington to talk about how Chinese diplomacy in Asia has been a bit tone-deaf the way that they've managed to clumsily push some of their Asian neighbors against them by the way that they handled relations in Asia. But in Europe it's been very savvy and very effective, China's diplomacy, very sophisticated, in fact.

We had the case of the solar panel tariff dispute last year where it did seem as if to the outside – and the Germans disagree with this – but to the outside, it seemed as if the Chinese quite effectively pitted the German government against the Brussels bureaucracy and undermined Brussels.

And you've seen it over and again with the dealings with the Dalai Lama, the way that China's been very efficient at punishing countries that meet the Dalai Lama and giving favors to the other big countries. So now you have a situation where France, Germany and the U.K. have all been through this process, and they're all now very wary about dealing directly with the Dalai Lama.

And then I think we also have to say there are – there are big questions about the underlying ideas of – that Europe is really trying to bring into its engagement in Asia. The whole – the whole concept of European soft power is built around the idea of institutions, about the model that European postwar institutions might represent for Asia, and also by the idea of international law. And Europe – a lot of people in Europe think that that's the great contribution it can have in this area; those are the ideas that it can try and introduce and encourage and stimulate into the Asian discussion; that's the role that Europe can play.

And the U.S., to some extent, has bought into that. The U.S. is putting a lot more attention into ASEAN in the last few years, and you do hear some people in Washington as well who are very optimistic that ASEAN can be one of these types of multilateral institutions that can be used to shape behavior and to balance, in some ways, China.

But I'm not sure – I think we have to be a bit careful about how far we might expect this to go. I mean, I would love it to be true, but it's not sure that Asia is really receptive to these kinds of European soft-power approaches. You know, it may well be that ASEAN develops into a much more coherent, unified organization that's able to deal on an even keel with China and occasionally to stand up to China when it feels it's necessary.

But I don't get the sense that Asian governments are really willing to pool sovereignty in that way yet, that they're really sort of being converted in the way that European governments were after the war. They'll still too invested in their own autonomy and their own nation-state. It's not just about, I think, their wariness of confronting China. I think there's something deeper about Asian ideas of statehood that are going to continue to inhibit groups like ASEAN. And even if it is true that we are at the dawn of a sort of new era of ASEAN where it becomes this more effective organization, I'm not sure that European lectures about the postwar experience are maybe the best way to foster that as well. I don't think there will be a lot of receptivity towards that type of more didactic approach. So I think that there are limited returns on that front for Europe.

And again, on international law, again, it would be – would be wonderful to think that international arbitration could be the root that would take the poison out of these very difficult territorial disputes in the South China Sea and the East China Sea. That would be – it would be good for everyone involved. Again, I think there are big limits, not just from China but from other countries in Asia, on their willingness to accept these types of forums.

And one way to think about that is that in the areas where it has been tried – and it has been tried in a couple of cases at the moment – that's interpreted in Asia not as a way of taking the heat out of these issues but actually it's interpreted as a way of escalating the politics of these issues. I think that shows you something about the way that for international law it doesn't – the idea that these tribunals will be the places where issues will be resolved is not one that's widely accepted.

All of this is to say, you know, very briefly, that I think there are specific limits that we can expect from what EU-U.S. cooperation might be able to achieve in practice on the ground in Asia.

And finally, just to sort of set things up for discussion – I don't want to talk too long, but just a brief word on some of the potential dangers for the EU if it pushes this idea of partnership (with the U.S. ?) too far. It's one thing to think about working together with the U.S. to establish common trade rules that will benefit both regions in the long run, but the EU also has to remember that the U.S. has its own very specific trade agenda in Asia. TPP is partly about ensuring and improving access of American companies to these fast-growing Asian markets. And for a lot of those American companies, many of their biggest competitors are Europeans. So there's an inherent competitive aspect to it as well.

The EU has an ambitious trade agenda in Asia, but it needs to very much step that up and to broaden it, as well. They can't be too passive on that front.

And this sort of carries on to the point made in the last panel a couple times. The European countries and the EU as well tends to focus too much on China, and it needs to broaden out, have a much broader agenda and sense of relations for the region as a whole. It can't let itself become too limited to China.

And I think the EU needs to think more broadly in terms of having more to offer and trying to find things it might be able to offer in the security piece. Sort of the big criticism, if you like, of the U.S. and of the pivot has been it's been too much about the military and not enough about economics. From the European point of view, you know, it's too much about economics and values and institutions and ideas, but if you really want to be relevant in Asia, there needs to be something on the security front.

And just to complete, throw an idea out here, there is one possible route there, which is the whole idea of arms sales. European governments do actually sell a lot of arms into Asia. There's a big arms race going on in Asia. It's the fastest-growing military market in the world. Europeans are very active in that. More coordinated and tailored policy could be a way where the Europeans could have a bit more leverage in some of the security discussions if they were able to bring that more together.

And then finally, as a final point, again, as it does make complete sense at the big level for the EU to be thinking about working in some ways with the U.S., it's not in the EU's interest to find itself considered in Asia as U.S.'s occasional plus-one; you know, the group that's brought in every now and again when it's useful for U.S. interests. So I would just point that out as a final point just as a sort of warning, as a caution for European governments when they're thinking through this, that they need to have their own game, their own plans, their own agenda; they can't just be a junior partner for the U.S.

I'll leave it there and then we'll hopefully open up to discussion more about China or more about some of these EU issues.

MR. CLIFF: Great. That was very well laid out. I think it's pretty clear to everyone who is listening to you that – you know, your basic points that there are a lot of shared interests between the EU and the U.S. but there are some important barriers to cooperation between the two – between the U.S. and the EU, and also reasons why the EU might want to be cautious about becoming too closely aligned with the U.S. in its policies towards Asia.

And I just wanted to pick up on that last point a little bit. And, you know, one can imagine a spectrum where, at one end, the EU basically pursues a policy towards Asia that is determined purely in European capitals and doesn't try to coordinate with the U.S. at all. And there would be many areas where we would have common interest nonetheless.

At the other end of the spectrum would be the United States and the European Union, or key countries within the EU – get together and develop a coordinated, common strategy towards Asia in which everyone has a specific role to play. Those are, sort of, two extremes, but in between – and, you know, I – clearly, you weren't advocating, or you were specifically saying the last one might not be such a good idea from the European perspective, that Europe could wind up being the junior partner in this and be subordinated to the overall U.S. strategy towards the region, but short of that, our – in terms of the other two options I laid out, do you think the European Union should simply go about pursuing its own interests, and where they happen to coincide with those in the U.S. then, yeah, maybe we could coordinate policy, or is there something else in between a sort of unified strategy that would almost inevitably wind up being U.S.-led. Between that, on the one hand, and a very sort of piecemeal kind of approach on the European side. Do you have any thoughts on that issue?

MR. DYER: Well, I think in broad terms, it's more just about getting the balance right. I mean, the – in terms of principles that are – although there are these very clear ways in which the U.S. and the EU are going to find themselves on the same side pushing in the same direction. And I think it also makes complete sense for EU governments and for the EU to be thinking and discussing common projects that they might have with the U.S and Asia. That makes complete sense. But I do think it's also true that the EU needs to think about having its own agenda as well and its own sense of what it wants to achieve, which tells – this point was made in the last panel about broadening out its relations and interests in Asia not becoming too focused on China, having its own – it needs to have its own separate identity as well if it's going to be relevant and not just considered as, you know, sort of a sidekick of the U.S.

MR. CLIFF: And – (inaudible) – I wanted to ask about, your comment about European soft power in Asia, and as an American who travels in Asia pretty frequently, particularly in northeast Asia, perhaps, but I would say, all of Asia, there is – European culture has a lot of attraction for people in Asia. Japan, I think, maybe is the country where that's most striking, where, in some sense, the Japanese, to an American, seem to think of themselves as just another European country in a lot of ways.

Now, obviously, American popular culture in particular has a lot of attraction, but – so on the cultural side, I think both have their pluses and minuses. What the EU brings to the table, though, is, by – sort of, by virtue of not being a superpower, I don't – although, you know, individual countries may have had bad colonial histories with particular individual countries in Europe, on the whole, European, in my impression, anyway, is seen as, perhaps, certainly not serving the American interests for the most part, is not trying to impose its own sense of order on the region. You know, on the one hand, that could be seen as a sign of weakness, but on the other hand, you see opportunities for that to be, actually, parlayed into more influence at the – at the cultural or political level.

MR. DYER: Absolutely. And I do think you're right. I mean, I think there's a broad respect for European countries themselves, but also – and also for the European experience. I don't want to sound too, sort of, sniffy or critical about that at all. I think that is an inspiring experience, and it something that there are lots of ways in which Asia could learn from and look at. But what I was trying to get at in my comments is to say that it's not necessarily a very good strategy for the EU to be thinking about these things in very didactic terms – to be going into Asia and saying, look, 70 years ago, we had these problems, and this is how we solved them, and so this is what you need to do.

You need to have these kinds of institutions, and you need to think of international law in this way, and we have the keys to the kingdom of a stable geopolitical environment in Asia. If it's too didactic, if it's too proud, almost, of that European experience, then I think it would be counterproductive. So a lot of it is all about tone. You know, there is a willing audience – a receptive audience, but as long as it's not fronted and too sort of, we know all the problems, we have all the solutions type of tone.

MR. CLIFF: With that, I'd like to open it up to questions from anyone in the audience.

Q: Thank you. My name is Davor Devcheck (ph). Thank you. Just the one question. In your opinion, is China's growth sustainable?

MR. DYER: So when I was a correspondent in China, I would have – I would basically have a different view on Monday from what I'd have on a Tuesday. On the Monday, I would think to myself – I would go to these towns, and there'd be all these new apartment buildings that were completely empty, and there'd be just masses of construction going on. And I'm going to find these new cities – indeed, these new suburbs that were all completely empty. And I was constantly finding myself thinking that this is a bubble, that it's – overinvestment isn't sane, you know, there's just – building up all these imbalances and all these excesses, and eventually it's going to, you know, reach a crisis point.

And then, on Tuesday, I would look at some of the hardcore numbers, and you'd think about, well, actually, you know, every year, 10 to 15 million people are moving into Chinese cities; that's – you need a lot of apartments to build for all these people coming to the cities. And I also think that, even, living in the cities, only 30 percent or 40 percent of the urban population was actually living in these new, modern high-rise buildings. The rest were still living in their kind of communist, Soviet-style era apartment buildings, and they are absolutely gagging to get a chance to move out into these – into these sort of new developments.

So this underlying demand for property is completely different from a sort of Boca Raton, you know, Arizona situation in 2007. So my journalistic instinct and my eyes were always telling me this is a disaster about to happen, and my kind of more economist – my (science ?) background was telling me, look at the numbers, that actually, there are powerful reasons to think why, if the authorities cannot make huge reform, but can keep, with an incremental rate of reforms that keep opening up little bits of the economy here and there over a number of years, China still has the gas to keep growing at 7 percent a year for another decade.

MR. CLIFF: Yes, sir.

Q: I'm a research fellow from Taiwan at CSIS. I very enjoy your talk. I very much appreciate it. My question is, from your point of view, how do you perceive Xi Jinping's Chinese dream compared with American dream, because, as you know, Xi Jinping's leadership is very different to others, especially previously. So how can we perceive this Chinese dream from your perspective? Thank you.

MR. DYER: I mean, Xi Jinping's Chinese dream is a fantastic political slogan, I think. If you compare it to the previous slogans of previous leaders – you know, Jiang Zemin's Three Represents – I've read books and papers about this. I still have no idea what it means, all right? Scientific development under Hu Jintao has made slightly more sense, but it's still a very technocratic, bureaucratic phrasing.

The Chinese Dream is a fantastically good political slogan that really, sort of, captures in some sense, you know the spirit of modern China, a growing middle class. It can mean lots of things about aspirations of this new middle class and improving the lifestyles of their families, but also has this slight sort of nationalistic quality to it as well, that it can also mean about this, you know, China that's standing up for itself and the world, that's staking its claim to be a great power.

But I also think that we tend to overstate just how different Xi Jinping is as a leader. And if I can use a frame of reference – the book I wrote where a lot of the things that people are now talking about about China, about this slightly more assertive policy – South China Sea, the East China Sea, against Japan, the military buildup; all these things were very much present, you know, before Xi Jinping took office. Indeed, I – you know, the book I wrote about this was actually – I submitted the manuscript even before he'd really taken office. So these were very much – very much in place. To me, actually, the two crucial events in modern China – recent history – were actually the Tibet riots in 2008 and the global financial crisis. The financial crisis created this strong sense that the U.S. was in decline and that this was now our moment – this was China's moment to actually step up and sort of stake its – stake its position, stake its claim. And the Tibet riots – that was the moment to me where it felt, being a correspondent in the country, that the emotional temperature of the country changed in an important way. That if you – if you want to think of China as a contest between – with, like, hardliners and reformers, the hardliners, particularly on the security side, really kind of gained the initiative in 2008 and they haven't let it go since. And so the closing of space you've seen for intellectuals and activists and any form of political opposition, that really started in 2008. Xi Jinping has carried that on, but it wasn't something that he, himself, implemented.

So both this more proud China and then this more authoritarian China and this more nationalistic China were already trends that are really – had already really started to flare up before Xi Jinping took office. I think he's embraced them in some way and he is a more confident figure. He articulates them better than maybe his predecessor did, but I think people are exaggerating to some extent the change that he, himself, has made. I think he's just more channeling what was already in the works.

MR. CLIFF (?): Can I jump in with a question here about – and this gets to my soft power point earlier – and, particularly, a few years ago, when we had Chinese delegations coming to the U.S. and they would talk about the U.S. decline and that sort of thing and, you know, I think the obituaries of the U.S. were premature – and for Europe, too, for that matter, but the – I think the Chinese are maybe starting to realize that the U.S. decline may be not – may not be as rapid or acute as they were thinking back in 2008 and 2009. What is – and I realize you've been away from China for a while now, but in your impression, what is their view on Europe? Do they still see Europe as, basically, stuck in the doldrums with no hope of escaping economically or are they recognizing, maybe, that Europe has some life in it left, still?

MR. DYER: I think there've been sort of three phases, if you like, of – recent times of Chinese attitudes towards Europe. There was a period – late 90s, early 2000s, where the Chinese became quite invested in the idea of Europe as this almost alternative pole towards the U.S. And that was an idea encouraged by lots of people in Europe at the time. And then the Chinese were quite excited by that; they tried to build up a lot of relations with the EU and European governments in hoping to foster that idea of the EU as an independent actor that would, in some way, reduce the dominance of the EU. Then they went into this period of – I wouldn't say despair, but of considerable criticism and disrespect of Europe during the euro crisis. The sort of tone of comments about Europe were almost disparaging that you would get in Beijing, where they really lost a lot of respect, both for European governments and the EU's capacity to deal with our problems, but also for their ability to really articulate a different path.

I think now what you're seeing, in the context of U.S. pivot to Asia, you have this – a China that feels isolated; it feels alone. And so it's starting to think of Europe much more of – not necessarily about the EU as being this pole that it can pick off, but working very aggressively and energetically to try and pick off certain European countries, to try and forge good relationships with those governments; with the Germans, for instance, at the moment, and trying to – trying to work on those relationships as a way of – not as an alternative or a conduit to the U.S., but just to give it a little bit more (balance ?) and to try and decrease the sense that they're – you know, they're being isolated and they're being engulfed and they're being contained by all these countries that are friendly to the U.S.

MR. CLIFF: Bob.

MR. : I see a thread between what the – the Chinese challenge on the economic side and the security side. And that is sort of, broadly speaking, a kind of a 21st century update of the Middle Kingdom mentality. And I think TTIP and TPP are critical because what we see China trying to do is create in Asia, a pan-Asian, no U.S. allowed trade arrangements. They're headed towards the RMB over time as a convertible currency; they're doing more and more trade in the RMB. And on the security side, I think the logic of what they're doing is quite clear, that they see Asia as reverting to what it used to be before the 19th century and I think the logic of their military behavior is trying to push the U.S. back to Guam; that's as far as they want to see us. And, given that, on that side – so, on the other – (audio break) – on the other side, I don't think we've been very smart in terms of trying to adapt institutions to accommodate the – China's rise. For example, even though, in theory, China – TPP is open to China, I don't think I've ever once heard anybody in administration say that. And it's a very simple statement; whenever China's prepared to accept the norms and standards of TPP, they're welcome to join it. That's the way TPP was designed.

And, on the security side, several administrations, for at least the past 15 years, have tried to engage them in some kind of strategic dialogue to create a framework for stability and the Chinese have studiously ignored it. And I think part of it has to do with their strategic culture; they think transparency is a weapon of the weak – strong against the weak. They like unpredictability, even though, if you look at the maritime traffic in the East and South China Sea, the chances of an accidental incident is – are growing all the time and have happened and probably will happen with more frequency. They resist efforts to have a maritime communications network to avoid that. So, on the one hand, we could do it better – and I think, broadly speaking, if you look at international institutions, we've not done a good job. My favorite hobbyhorse is the IEA. How do you have an energy – international energy agency that's focused on consumers that excludes the largest consumers of energy in the world? I mean, it makes no sense. And I think we – so I think the Chinese have a point and – but we have not done a good job of giving them an incentive structure to have a larger voice in the international system and I think they're going – they're beavering away on trying to create their own. (Audio break.)

MR. DYER: Two very interesting points. Start on TPP: I think what you've seen in the last couple years is, actually, a big shift in Chinese attitudes towards TPP. Two years ago – yeah, two years ago, it was – the rhetoric was, this is economic containment. And now, the – you know, they're rhetorically much more open to that. I think one of the ways to think about that is that, you know, you have this new administration in China that's very focused on economic reform and knows that its future is tied on trying to push through some of these economic reforms to try and, you know, keep the growth rate going. And they see, I think, that even the sort of possible threat of these kinds of trade deals as a potential lever to win some of these bureaucratic battles that they're facing at home to – over trying to sort of liberalize bits of the economy. So I think that's the reason why China has shifted its tone and rhetoric about TPP. I think no one – I think the administration has, you know, rhetorically, you know, said it's open to that, but I think no one on either side actually expects anything like that to happen and – you know, for the – you know, even if TPP actually does get signed, for a very long time. But I think because of this idea that, you know, these trade deals are an interesting way to force reform within China, that's why the Chinese have changed on that.

On your broader point about accommodation, it's a very well taken point, especially your point about international institutions. One could talk a lot about the IMF and IMF quotas and that – the reform package being caught up in Congress, as well. But as just one general point on accommodation: I think one reason why it's a very hard conversation to have is that, when the U.S. talks about accommodation with China, it's often talking about something very different from what the Chinese think about the accommodation. When the U.S. talks about accommodation, they think about it almost like Cold War terms of rules of the road, you know, this be a series of procedures and rules we'll have when our ships and your ships are in the same place and we'll have lots of red phones we can ring and lots of warning procedures. And there'll be, you know, ways to stop accidents happening. That's, in some ways, the way the U.S. thinks about accommodation. When China thinks about it, it thinks about a much more structural deal about a future of Asia; sort of, you know, you give us Taiwan and we might give up on North Korea – a sort of, you know, grand bargain type of framework. As a result – it's a very hard thing to do anyway, but even if the two countries wanted to have a real conversation about accommodation, they're kind of talking past each other in conceptual terms. And so –

MR. CLIFF: Introduce yourself again, please. Thank you. Appreciate it.

Q: Sarang Shidore, currently in the U.S. city of Texas and also formerly at IDS in New Delhi.

The question I have is, given that we are 14 months away from the Paris climate talks, there has also been a significant shift in the Chinese approach to climate in the last couple of years. And do you see the possible outlines of a U.S.-China bargain on climate that can then induce other countries like India and others to join? And if so, what would be those outlines and what strategic implications could they have, knock-off effects in other arenas? Thank you.

MR. DYER: I mean, I have to confess that's an area I'm not hugely familiar with. It's not one of my areas that I've spent a lot of time covering so I wouldn't want to speculate too much about, you know, future big deals on climate change, other than to say it's hard for me to believe that the Chinese would sign up to any real specific deal from the U.S. that didn't have the obvious buy-in of Congress, and it's very hard to see Congress giving that buy-in. So I think there's a fundamental blockage to any real progress on that front even if there was political will on both sides for it to happen. But I'm not familiar with most of the details to really discuss both frameworks, what they might look at.

Below that surface, though, there are obvious areas of where the U.S. and China are trying to work together on some of these areas, particularly on shale gas. And there's this big push in motion – and I think very realistic push – to try to and find concrete projects where the U.S. and China can work together, because there's no way around the sort of inevitable competition we're now having in the naval arena, in the military arena. These things are going to be locked in for some time. There might be low-level competition but there's real competition.

And so one of the ways to counteract that is to try and find real ways in which the U.S. and China can cooperate on specific projects, and that's a thing – a very important thing that both sides need to work on very much. And shale gas is one of the areas where that's a real possibility, where China has these huge unexploited reserves. It's desperate to get technology. That's a sensitive issue because U.S. companies fear that if the technology was licensed in some way that it would then be stolen and sold back.

But they also – the Chinese are also very keen to get regulatory experience, to understand how it is that the U.S. manages the shale gas deposits, how it does so without causing big accidents. They're very keen to get that sort of regulatory experience from the U.S. And so that's one where – that's one area where there is a lot of talk going on between the two governments and one area where there could be a lot of genuine, practical cooperation over the next few years.

Q: Thank you very much for a wonderful presentation. My name is Tanaka from Japanese NHK Television.

I would like to ask you about the President Obama's coming visit to China next month. What do you focus on his visit to China? Would it be environmental issues or cybersecurity issues or Hong Kong democratic movement? Thank you.

MR. DYER: You know, that's a very interesting question. I think the last bit of comment of what you said is in some ways the key one. There's a real risk that this trip will be torpedoed, dominated by what's happening in Hong Kong and what might happen in Hong Kong. Before this, I mean, the agenda was, in a sense, quite obvious. I mean, the U.S. would want to bring up issues about cybersecurity. It would want to bring up some maritime issues – the South China Sea, East China Sea.

And more broadly, you know, there would be another stage where the president would be trying to see if you can have that kind of elusive conversation with a Chinese leader about big strategic issues that the U.S. is always wanting to have and which it has never been able to have. And there was this hope that Xi Jinping, being this more self-confident character, would be willing to engage in that type of dialogue. It hasn't happened beforehand, but that was the sort of underlying hope on some of the U.S. side.

But I think it's a real risk and a real possibility that Hong Kong will become the talking point. And, you know, it very much depends on how things pan out in the next few days, in the next week. But especially if there's some violent crackdown, if we have more of these kind of gangs going in and breaking up protesters, it's quite likely that Hong Kong might end up dominating at least some of the agenda.

MR. CLIFF: Since no one else has raised their hand, I'd like to ask a question that was – that you've kind of alluded to in your – in your last couple of responses, which is the U.S. – and this would apply to the EU, I think, as well – the U.S. search for things that we can cooperate with China on.

And the underlying assumption here seems to be that, well, if we can develop some habits of cooperation on issues that aren't controversial, that that will somehow spill over into other issues where we seem to have more trouble finding cooperation on – you know, you gave the example of encounters between ships or something like that, where the Chinese really don't seem to be interested in a dialogue, but maybe if we work with them on shale gas, then they will be interested in dialogue.

And I guess I'm already betraying my bias here, but what's your view on the value or the ability of areas in which we do cooperate being able to expand out into other areas where cooperation is currently difficult?

MR. DYER: I think it's a two-pronged thing. I mean, it's partly that hope that if the U.S. and China can cooperate on real things that it will create these habits, as you say, and that it will spread out and it will slightly loosen up the context of discussions at the military arena, which already have moved on a little bit but are still very stiff and are in this context of competition.

But it's also – it's not just about creating habits. It's about also creating this kind of – a ballast in the relationship so that our real interests and real bureaucratic interests and real national interests at stake beyond the obvious economic interdependencies when the – you know, which can in some way balance this inevitable competition.

Another way I like to think about it is that it seems to me that, you know, the U.S. has a huge interest in trying to encourage more Chinese investment in this country – a strategic interest, not just an economic interest. And that's obviously an incredibly controversial issue. You know, anything remotely technological finds itself in Cepheus (ph) in two seconds when a Chinese company tries to buy something here.

But just think about it from the other way around. I mean, until the Chinese government really started to get rough on American companies and foreign multinational companies in general a few years ago, the single-best lobby the Chinese had at this time was the business interests, was the Boeings of this world who had been their biggest supporters. And whenever things go rough, those companies weighed in and tried to smooth things over and ended up, you know, helping China in lots of ways.

I think the U.S. needs to start thinking about these big Chinese state-owned companies as potential allies here. They're looking to expand abroad. The people who run these companies are often very senior people within the Chinese administration or one job away from very senior jobs in the administration. These are institutions and interests within China, or potential interests in allies, and they're individuals within China or potential interests in allies, because when you look through the Chinese system itself, there are very few people who have any actual personal stake in the U.S. economy or in U.S. interests.

And I think that's another area where the U.S. could really sort of help itself a lot if it could slightly reduce its sense of, you know, hyper-anxiety about anything to do with Chinese investment and think about – think about cultivating its own constituency within the Chinese corporate state-world.

Q: Thanks. Rob Anderson from the Dutch Embassy here in D.C.

Geoff, at the start of the – of your introduction you said that if you look at the big picture, China's rise will obviously push the EU and the U.S. a little it close together. But if you look more closely, then there are a couple of things that kind of inhibit that kind of confluence of interests. And one of the things that you mentioned is – and refer to are – is the way we still struggle in the EU with our kind of making of our common foreign security policy.

Now, policy-wise, what steps could the EU take on a member-state level and a Brussels level, to your sense, to kind of beef up our policy and strategy towards China in particular and Asia as a whole? Thanks.

MR. DYER: I mean, it really does come down to the big governments knocking heads together and deciding that they have a common interest and taking a single line. And I think, you know, the Dalai Lama visits are not in themselves substantial, but they're symbolic of this broader issue.

I mean, if the Germans and the French and the British all said, we're all going to meet the Dalai Lama; we see him; he's just a religious leader but we're going to meet him on those terms, and then they all did it at once, the Chinese would have a very hard time actually standing up to that. But what happens is that let themselves be picked off. They let themselves be punished and pushed around and played off against each other, and that ends up ceding ground to the Chinese.

I don't want to make it sound as if this is all about sort of standing up and being tough for the Chinese, but that's a symbolic example of the way in which, if the EU gets those big states on board taking a common line on whatever the issue is, then that's the way to forge a much more coherent common position. That's maybe an excessively British view of European politics and European foreign policy, but it does seem to ultimately – you know, when the big states are not in line, when they're playing their own agenda, then that's when the thing really kind of falls apart or becomes harder to really – to really build.

MR. CLIFF: Yes, ma'am.

Q: Hi. Jennifer Leithe (ph) from Regis (ph) Advisory in London. Speaking of areas that the U.S. and China can work together on projects that they can – you know, they have common interest in, could you give us a little bit of sense of what the thinking in Beijing is on resumption of the six-party talks and whether there's any movement in that in general?

MR. DYER: Well, I think the – as is often the case, I think the Chinese would be absolutely delighted to have a resumption of the six-party talks. I mean, I think that the opposition to it is much more from this end, where, you know, the Americans, for very good reasons, think that there's no reason to restart these talks unless the North Koreans make some sort of apology or show some sort of, you know, remorse for recent behavior. They don't want to make it seem as if they're rewarding the North Koreans for missile tests and nuclear tests.

So I think, you know, that's not one of the areas where I would imagine you will see a lot of movement in the near future. I don't particularly see chances of the U.S. moving its position on that front, although the U.S. also has to be very careful about some of the things going on in South Korea and the way that that could potentially change, but I don't see any particular signs that the six-party talks themselves will be – will be that forum for, you know, bringing the U.S. or China more close together.

MR. CLIFF: I overlooked –

Q: No problem. Julia Chang Bloch. I'm president of the U.S.-China Education Trust and a lifetime director of the Atlantic Council. I want us to end on a high note, so I have a softball question to answer your question about where U.S. and China can cooperate. And I would like to bring the EU – or Sweden into this as well.

You did not mention educational and cultural exchange. This is one area where, despite our differences, despite all that is happening in the South China Seas and the East Chinese Seas, cooperation is continuing. As you know, I think, we have over 300,000 Chinese students studying in the United States. There are equally large numbers certainly in England, in all the English-speaking countries around the world.

Can you comment on perhaps where the EU and the United States here might jointly or cooperatively launch something that would win – hopefully win the hearts and minds of China's next generation – getting back to your soft power question.

MR. DYER: I don't have a great deal to say other than to completely agree with you that this is something that is a huge potential area for – you know, to change attitudes and to change ideas. It's a huge – the numbers are vast in terms of the numbers of Chinese students both here and in Europe and a place like Australia. That can only be a good thing. Likewise, it's very encouraging that the U.S. is trying to very much increase the number of young Americans that are going to study in China.

This clearly, you know, can only be a good thing, but I wouldn't necessarily say that – one has to be realistic and say that that's not necessarily going to, you know, resolve all these tensions and all these problems, but it has to be – has to be a win-win, and if the U.S. and the EU are working together on that, that would also be a very good thing.

MR. CLIFF: I think we're just about out of time. And maybe I would just like to ask Geoff if he has any final parting words of wisdom that you want to share. Or maybe you can just answer the question that's in the title of your book. How can America win the competition with China? (Laughter.)

MR. DYER: That was the title in America. In Europe it didn't have that title, if I could say that. (Laughter.)

MR. CLIFF: Is that your answer?

MR. DYER: That would have to be a slightly longer conversation, I suspect. (Laughter.)

MR. CLIFF: OK.

MR. DYER: But thank you for drawing attention to it. (Laughs.)

MATHEW BURROWS: I think we want to get started on our last panel, allow enough time before we break for lunch.

We have a very tricky title here: "Outlook to 2025." The first tricky part of it is the thing, 2025. In my experience – and I guess I should introduce myself. I'm Mat Burrows, the director of the Strategic Foresight Initiative at the Atlantic Council. A lot of you know me too from my Global Trends hat at the National Intelligence Council, which I did the last three Global Trends. So I'm very familiar with the sessions looking out to 2025, 2030, and what I have always found a problem is to get people actually out to those years and really to think about these broad issues. So I'll have a few suggestions, but I wanted to also look at the rest of this title.

So "trans-Atlantic," that seems to me to be fairly tricky because we don't actually know, if you're looking out in 2025, you know, where the EU is going to be. With the U.K.? Without the U.K.? With other new members in the EU? How strong? How not so strong? Also, obviously, where the U.S. is going to be at that point.

And finally, "Asia." And I think we've heard a lot about this already. You know, the tendency is to be very China-centric. Now we're talking about 2025. We have experts here on South Asia, which I think is very good because we want to broaden this out to just more than China.

So what I would like the speakers here to concentrate on is to look out to 2025 and to get us – elevate the discussion here to some of these big questions, which I think really are important. First, will there be a major conflict, whether it's China-Japan, China-India, India-Pakistan? I mean what are we looking at when we're thinking about 2025, a very conflictual environment or one that's actually where you have more of the structures – we talked about this a little bit this morning – that replicates maybe more Europe?

You know, what kind of economic picture are we looking at? We've talked, again, this morning about China now being – surpassing the U.S. in – if you measure the GDP by PPP. Will China continue its rise? Will India also begin to pick up speed? I mean, there's a huge worry in India about the growing gap between the two. Will that have closed? And will India in 2025 actually look the stronger power, because by that time of course there are some demographic facts that are going to make China's growth much harder. India is in a much better place.

So I'd like to get people to think about that. I think particularly this question that I've struggled with is to try to think about whether China can make that transition to a really innovative economy where it's producing high tech. You know, really that kind of transition and doing it in this period seem to me a huge challenge.

Then looking at U.S., Europe as partners, and partners in Asia, I think there's a big question. And we kind of touched the surface this morning of, you know, is the trans-Atlantic idea of how you have a world order, how you construct a world order, is that actually going to be what we are talking about still in 2025, or are we going to actually, over time, as with the economic rise, you're going to see Asia and Asia's idea – whatever that is and whatever we mean by "Asia" – but Asia's idea of a world order begin to take over?

Finally, I mean, there are a lot of events. We've touched a little bit this morning on North Korea. You know, we haven't talked a lot about that, but that would be one issue. Is it collapse or is it – I have to mention, I think in one of the first Global Trends editions there was talk about North Korea collapsing by 2010, and we've been kind of predicting that for decades without it ever happening. But that is – obviously it would be a huge event.

And obviously, you know, how China, how India relates to U.S. versus how it relates to Europe, whether it – certainly one big question we talked about this morning, is China more interested in bilateral ties with individual countries or does it really look at the broader EU, and similarly the same would be for India and other Asian countries. So with that, I'll turn it first to Hans Christian, who is one of our partners, director of strategic analysis in the government offices of Sweden.

Hans.

HANS CHRISTIAN HAGMAN: Well, thank you very much. And first of all, thank you very much to the Atlantic Council and to both Barry and Matt for arranging this conference. It's of great value for – I would say for Europe to come to Washington and ask some of the big questions and try to get some help in answering them. It's invaluable. Thank you very much.

Let me start off. We can follow long-term trends and – (inaudible) – wise to change and adapt in accordance with new circumstances, but there will always be choices to us, and I think those choices are particularly in the 2025 perspective. Today Europe and the U.S. have a choice, how much and what way we cooperate with China, Japan and ASEAN. The probability of the dream scenario is, unfortunately, small. But we can perhaps achieve something realistic and acceptable, which is a lot better than the worst, darkest scenario.

We need to know where we can come from in order to know where we're going, so let me just go back to the early 1970s, when I was a kid in Tokyo, a Boy Scout. I've sworn allegiance to the American flag too many times. But Asia's combined GDP amassed to 15 percent of the world's output some 40 years ago. India represented 1.8 percent, and China, with a GDP of $91 billion, only 2.7 percent of world GDP. Japan was in the lead with 6.2 percent, and it represented almost 40 percent of Asia's combined GDP. In those good old days, the United States had 32 percent of world's output. That was then.

Simply put, there was no transatlantic interest in Asia because trade with the region was tiny, and what interest Europe had in Asia had more to do with it's coloring of past than investing in Asia of this century.

Today there is reason to do a whole lot more. So just a decade ago – move forward in time – the EU was the largest economy, the U.S. second, then Japan, and China, and then India. Just a year or two ago, the EU was number one, then was the United States and then China and then came India and Japan, in PPP (ph) terms. And today, depending if you look at the IMF numbers, China passes the United States in 2017, if you go by World Bank. It happened last week. But somewhere along the line, the United States and China are neck and neck, and they both pass the European Union today.

And in the future, when we look – and if we make some careful predictions, we use the IMF numbers and we have some highs and lows, but give or take a little bit, you see that in 2025, China's economy will be considerably larger than both the United States and Europe. China, India and Japan together will most likely be bigger than the United States and Europe combined. And Asia combined will be close to half of world GDP in 2025. I just – a comment on India. Even a good scenario for India and a semi-bad for China – should we say only a continued rise of 5.5 percent – India's still just a fourth of China's economy in 10 years' time. So there is some difference there.

This pattern in the rise of Asia is painfully clear in many other areas: urbanization, the megacities, energy consumption, CO2 emissions, education and R&D. Innovations and patents: super important.

The Chinese piece of the pie is bigger and often bigger than the American or European pieces. I think that's stating a fact.

According to the OECD, China and India have almost twice as many graduate students per year as the United States and EU together in 2025. China alone will produce more than three times the U.S. number in 10 years' time. It's double today.

Quantity is not everything. You bet. But it is something. China's now the largest applicant country for patents, and there's no reason to believe that Chinese quality is forever predestined to be lower than South Korean or Japanese. It is not improbable that Western trade with investments from Asia will be more important than transatlantic trade and investments in 10 years' time. When compromising with and attracting Asian business and investments is more important than securing norms, we have a very different world. Hopefully, we won't have to make that choice.

Now there are three mutually reinforcing trends we just want to mention. It is the rise of the middle class. And if, according to the U.N. predictions, we'll have half the world's middle class in Asia in 10 years' time. It's huge. From half a billion today to 3.2 billion in just 15 years' time.

Globalization, production value chains and consumption patterns are hugely important and are making this world more fragile and more dependent on each other. That will continue that trend and will complicate matters.

Technology is also important, but we see that more as a global equalizer. Everybody has the same access to technology, whether it's NanoThree, printing bio, quantum computing, and that that difference is shrinking between the United States, Europe, China and India, anybody can afford. And those parts of the society who can afford, the companies and elites, are on the same level there globally.

And in biotech, China invests more than the West all do together. And here the West will want to tap into this wealth and knowledge, but it may be a seller's market. And we may compete more across the Atlantic than cooperate, which would be a pity. In other words, there will be greater correlation between population size and economic and military might in the future. We're moving in that direction. In an interconnected world, large masses of people will have masses to say and contribute with.

But this is a double-edged sword. Not all values and interests will be Western, and the West's share of global voice will be significantly smaller than it is today. Somewhere along the line, less than 10 percent of the world's population, i.e. the West, even with a third of global economic and half of trade output, in the best case scenario, cannot dictate the rules of the road in Asia with 50 percent of the world's population.

China's challenge and opportunities. We mentioned some of those this morning, but I would like to highlight a few of them. China will face many challenges in the next 10 years. We all know that. Her development will not be linear. Pollution and environmental disasters, rapid urbanization, corruption scandals, economic bubbles and corrections, freedom movements and nationalism will provide both shocks and disruptions, more or less.

In a globalized world, these will be international crises much more than they were, probably today, but even more than they were a few years ago.

And will stability, growth and trade in China be so important to the West that we're prepared to compromise our values?

And demography will have an impact on growth in China, but perhaps not more than we've had in Europe or in Latin America, although a potential internal political challenge, a larger middle class, increased globalization and connectivity will most likely benefit China. And in several ways, China will integrate more into the world thanks to these trends.

But Chinese GDP-per-capita is still just a fourth of the West's GDP per capita, and there is room for growth. It will be a bumpy ride, but there will be room for growth – considerable room.

Who would argue that the productivity of the average Chinese is doomed to remain a fraction of the average Japanese, South Korean, European or U.S. worker when the average Chinese produces 50 percent of the average American worker, the Chinese economy is twice as big as the U.S.

On the military side of things, it is inevitable sooner or later than the U.S. cannot militarily dominate Asia-Pacific without the agreement and support from all major states in the region. Air superiority and sea control are being challenged today, and it's a matter of time before China can deny the U.S. these freedoms even with a technologically inferior force. You don't have to dominate to deny that simple strategy. It is only – if it is only recognized regional status, power projection and power sharing China craves, that is the lowest price we can hope for, thinking of Matt's question of conflict.

Reading Chinese strategy, conventional means will only be part of the equation, and cyberspace, psychological operations, economic tools and subversion will all play major roles. Today's fishing vessels in the South China Sea may be equated to the green men in the Crimea. It is unconventional forms being used to get a bigger picture.

It is very much the indirect approach at the operation level and a very strategic perspective, and how coordinated that is today I have no idea, but it is moving in the right direction from a Chinese perspective.

If we add technological invasion and – to this equation, we get a very interesting picture. It's not only DARPA who is interested in nano, biotech, bioengineering for military use, or Honda and Google who will be alone in robotics and artificial intelligence. Warfare may look very different tomorrow, and aircraft carriers may not be the most useful tool, unfortunately, I could say.

Today, China spends, according to CIPRI (ph), about a third of the U.S. on defense and is only focused on its neighborhood, unlike the United States. Should Chinese defense spending continue to grow and Chinese nationalism, prestige and the PLA's place in Chinese politics show no sign of decline, it will not be long before Chinese spending is about half of the United States', and then we'll have a very different Asian context.

And just a mathematical exercise just for fun, but should Chinese military growth continue the way it's done for the past few year, it'll be up to the $600 billion level by 2024. But we don't have any idea if that will continue or not. That's just an exercise.

So there will be balance, cooperation and sharing of power, or there will be challenges, disruptions and perhaps conflict. The latter will be catastrophic not only for Asia and the United States and Europe, but also for transatlantic relations. You don't want Europe to have to choose between trade and supporting Japan or the United States over uninhabited islands or incidents at sea. That's a very difficult question for Europe to manage.

It is not bad if the world's two largest powers cooperate in securing the global commons, even if the Chinese way will be different for the United – from the American way. Good dialogue, cooperation and compromise from the tactical level up to the highest political and macroeconomic level between the United States and China is of highest priority to the EU.

The big issue – in conclusion, what I'm most concerned about is values, norms and standards. China and India will have a greater say in the world and they will have an impact on global institutions, how we make peace, how we promote human rights and how we protect the environment. With increasing connectivity, new technology, middle classes and further globalization, I see large parts of Asia becoming increasingly global players, and there is more mutual understanding today. But there will be many gaps in values between the West and large parts of Asia, but there will also be gaps between the United States and the U.S. (sic\EU) to be honest.

The very fact that there will be multiple norms gives those who want to go their own way or to skip global responsibility more options. That's not good perhaps. Transatlantic coordination, rhetoric and initiatives must follow the same definitions and standards. Cracks in the façade will not be difficult to exploit. The best case is to convince Asia, and especially China, on the profitability of Western norms. It's been a pretty good ride so far.

On a less positive note, the second-best is to have a slow, but controlled, meeting of some norms and accepting divergence on others. The worst option is to capitulate and give in, give up prematurely, and we'll have a free-for-all. This makes it all the more important to get the T-TIP deal. Yes, trade is a key issue, but just to allude to what Matt said, transatlantic norms, R&D, innovation, education, energy security is super-important. And then we have the traditional elements, NATO and national security, not far behind but very much elements of the whole transatlantic cooperation. It's a lot more than just trade and NATO.

Engaging China and global trade and its rules is key. It is a fact that China has played by the WTO rules. The rules and standards set by TPP will be extremely important for Asia and China, and it may be the biggest bargaining chip the United States has. TPP is super important in the future.

We need more cooperation with the PLA, not less. We need more cooperation with Chinese universities, not less. We need more regional cooperation and economic interdependency, not less. We also need more and new global fora which reflect the New World. Sorry to say it, but G-7 and G-20 are not the biggest seven or 20 economies. For Europe, Germany would be the only country if you re-created G-7 and you were loyal to the concept today.

The U.N. Security Council, IMF, World Bank do not reflect today's geoeconomic and geopolitical reality. Reform is key. Yes, this means that non-Western values will have a bigger say, but at least we'll have a channel and can channel the new values in established institutions and some of the new fora where the West at least has a major voice, and the alternative is that we will not use these institutions, we'll have new fora where the West will probably only have junior roles and a junior voice, and the result will look very different, and it may not be pretty.

So if we're not united across the Atlantic and we stand together, the default will be very complicated and a very messy world. The norms and standards will be up for grabs and probably not be grabbed by us. Thank you very much.

MR. BURROWS: You got us off on a – on a good note there. Lots of things on the table.

The next speaker is Kathleen Hicks, who's the senior vice president, Henry Kissinger Chair; director of the International Security Program, Center for Strategic and International Studies. That's kind of a mouthful.

KATHLEEN HICKS: Yes.

MR. BURROWS: Kathleen and I worked together when we were both in government a lot on these same issues of strategy. So look forward to your remarks.

MS. HICKS: Great. Thanks very much. Hans Christian did, really, a very thorough job, and I have many of the things written down here – (laughs) – so I'm not going to bore you by repeating them. But I would say in general, in terms of the trend lines, I very much associate myself with the – with the factual points put forward by Hans Christian in terms of where things are going in the next 10 years.

Let me just then add a few editorial thoughts and maybe some thoughts on what the big levers are, what the big changes could be that tip things one way or the other.

I have, as Matt has said and as with several others in the room, including on the panel, spent a lot of my career looking at the future, and if there's one thing I've learned, it's that you're always wrong, so it's a really bad idea to be predictive about what the world is going to look like in 10 years.

So why do we do it? Why do we torture ourselves? The answer is because you can learn a lot, you have to do that work, you have to do the horizon scanning in order to understand the trend lines that are out there, how they might intersect and, frankly, to be as flexible as you can and as agile as you can moving forward.

So despite the fact that, you know, Secretary Gates was right when he said when it comes to predicting the nature and location of our next military engagements, since Vietnam, our record has been perfect. We've never once gotten it right. Even though that is absolutely true, I think even he would say it makes sense to spend some time, as we're doing here today, to sit down and think about the future and how we need to prepare for it, given the very broad range of challenges.

Those challenges in Asia are extremely multifaceted, they're well beyond the security sector, which is my area of particular expertise, and globalization plays a really interesting intersection in Asia, where you have both a very traditional, if you will, state-based environment where traditional toolsets for the United States matter, military power matters in Asia. You can see how it can be applied.

State-based economic power matters. Freedom of the seas matters. But globalization overlays all of that and creates – as Hans Christian said, it does create a lot of fragile points, some brittleness in the system that's important to keep in mind. But I think it also does create a dampening effect on the likelihood for armed conflict, and so we should be looking at how globalization proceeds. And I do think it will proceed despite setbacks from time to time based on some actors, some groups of actors who come along to think that it's not such a good idea. I think it will continue apace, if only because of the cultural and economic drivers behind it.

But, you know, one of the things that the U.S. always has to be thinking about is there are, you know, at least a million Americans who live in Beijing; it doesn't exactly give one a desire to go have military conflict over China, and I'm sure the Chinese feel very much the same way with the size of the population here.

So there is an effective globalization that's important, it is dampening, it is not determinative, but nor is – nor is there a structural imperative that there has to be conflict between the United States and China. And so herein comes the issue of why you can't be predictive, because it's not structural. There are choices, as I think Hans Christian said, choices that are going to be made along the way here. How we make those choices are very important.

Whether the U.S., for instance, decides to engage in Asia in substance and how it does so, whether its effect is stabilizing or destabilizing, the extent to which Europe decides to invest itself in the economies of Asia for its own benefit – all of these things will become important.

So let me just mention some of the shifts that I think are important to keep in mind. One very important one is certainly in the energy sector. And again, I'm not an energy guru by any stretch of the imagination, but one could certainly imagine in the next 10 years changes to energy approaches, either globally, such as the United States is doing in its own country in terms of our fracking technology and otherwise, that could really affect how the countries of Asia think about both their own region but also about areas like the Persian Gulf. You know, Asia is highly dependent on the Persian Gulf, China in particular. And so the dynamics around energy and energy independence or shifts in energy or greater reliance on energy resources out of region – that will be incredibly important for shaping the dynamic in the next 10 years.

Also, we know we are inevitably going to have some major natural disasters – I hate to say that, but it is true – in Asia. And how that might affect some of the economies of Asia, how well they can recover, how massive such a disaster might be, how – who comes to the aid, how are they helped, that's all incredibly important as well. Certainly the economics shifts. I mean, we've talked about the strength of the Chinese economy and I think implicit in your comments is the brittleness of that. There really is a brittleness there. And a lot of reason for concern that the Chinese economy could flatten out, that that movement or growth of the middle class could be stymied for some period of time. What kind of social tensions might that bring?

And then there's India. I think I'll leave to the true expert on South Asia this piece, but I actually think that is probably the biggest wildcard over the next 10 years. What will India choose to do? How will it choose to engage in the international environment? Will it stay sort of where it has been, regionally focused, very much dedicated to its nonaligned approach? Or will it choose to come forward with its incredibly strong economy right now – will that continue and is there movement? That makes India a much more important player than people – we all talk about it, but then people are really given it – credit for it. And what does that do to the dynamic among Russia, China and the U.S. when India comes into play or not?

I think the last thing I would just mention, which is more of a global issue, is this issue of the role of international institutions that came up. Is there a revisionist vision for the international system, as Matt framed up as a question at the beginning, that could be coming from Asia? My answer is no, but there could be. And so this really is an incredibly important window of opportunity to demonstrate the value that countries such as China get out of the international system that exists today, that's built on Western norms.

And so that's a policy decision that we collectively will have to be demonstrating, the value they get in terms of, again the economy, in terms of the stability that the U.S. military, for instance, has provided for their energy supplies in Asia, for global commerce – you know, counter-piracy, you name it, elsewhere.

That's something, because of the weakness of those institutions, if they do not reform – and I'm with Hans-Christian they need to reform – but if they fail to, if they fail in one of these wildcards, for instance, that pops up in managing them, you could see a – I think in the next 10 years really what you're most likely to see is not an alternative system but a prolonged period of chaos, which we are somewhat living in already, as opposed to clean new system developing within the 10-year time frame. But I think a new system would be on the horizon. And the question at that point will be more about how do we fight in the norms and values we want, as opposed to being able to protect them today.

Just I want to close with just some areas that I think are common interest areas for countries of Asia and for the trans-Atlantic alliance, and certainly members of the EU. Freedom of seas – freedom of navigation in the air and seas I think is incredibly important. This is an area of great friction with China right now. I think it will continue to be. I think the chances for miscalculation are high. And I agree with Hans-Christian that the best thing we can do is open as best we can the lines of communication at every level.

I'm much more confident about the quality of engagement that happens at the national political level to national political level. I'm much less confident in the military-to-military ties. And down all the way at the tactical level, if you will, that's incredibly important that our – whether it's in the airs where we see near-misses between, in our case, the U.S. and Chinese fighters, or on the seas where there is in most countries, such as the U.S. and Iran I'd give you as an example, a professional level of courtesy and cooperation, understanding and ability to talk bridge to bridge.

That doesn't exist today between the U.S. and China, let alone China's neighbors and China. So I do very much worry about that. That's an area I think that's pretty low-hanging fruit, where the European nations could come in and do some more exercises. They can be built around humanitarian assistance and disaster relief, general maritime domain awareness. There are a lot of opportunities to grow out some trust and confidence-building there.

I'll just mention the Arctic, which I don't think will be totally ice-free for the summer in 10 years, but who knows. But certainly an increasing source of – you can – it's a double-edged sword – tension and/or cooperation for Europe and Asia. And I think that's an opportunity maybe to build on some of these norms now for an area that we know will only increase in potential friction. The Chinese are very interested, as are some other Asian nations. And it's an opportunity for us to work in Asia now into some of the constructs that we have for the Arctic.

And more generally on climate change, I think you're seeing some shift. Chinese – the growth of the middle class certainly leads to people who aren't thrilled about living in extremely smoggy conditions in their cities. They're starting to feel the push from India in terms of the effects of climate. And so I think there may be some opportunity there for India and China and the West to reestablish some sense of norms around climate as it comes to affect them in ways that we have long felt the effects.

So let me just stop with those thoughts. And I'm open to questions on any of that. And I congratulate you for a wonderful presentation of the trend lines.

MR. BURROWS: Well, thank you, Kathleen. And thanks for expanding on what Hans laid out there. I want to turn now to Leo Michel, who's the distinguished research fellow at the Institute for National Strategic Studies, National Defense University, and obviously maybe take us a little bit deeper into the trans-Atlantic side of this kind of three-pronged approach we have to looking at 2025.

LEO MICHEL: Thanks very much, Matt. And thanks to the Atlantic Council and to the government of Sweden for inviting me to join you.

I'd like to do three things in approximately 10 minutes. One is to make a few general points about Europe and the rebalance. Secondly, to give you some specific examples of how different Europeans are rebalancing themselves in different ways. And then, third, in the concluding minutes, respond to your request to look out to 2025 and perhaps offer some more big-picture suggestions for some of the things we should look at.

And I will mention that a colleague of mine at our institution, INSS, and I just published – well, in July – a study – an assessment of how Europe is looking at the U.S. rebalance. And it identifies some of the points that I'm going to make in this presentation. It is available online as well.

A couple general points: It is clear that the U.S. rebalance has captured the attention of European allies and partners. And when it was announced, first as a pivot, very quickly rebranded as the rebalance in late 2011, early 2012, there were varying reactions within the European defense and security community.

There were, obviously, some who were worried that this signaled perhaps a U.S. lack of interest in Europe and its immediate region. The worst case was that this was somehow a cover for a deliberate policy of U.S. disengagement, and some concern that the military aspects of the rebalance could actually generate a very unhelpful, unpredictable but unhelpful,
Chinese response.

Broadly speaking, I think many of these concerns have disappeared significantly over the past couple of years. And one aspect of these concerns, the idea that rebalance was a zero-sum game, that more U.S. attention or heightened U.S. attention in Asia-Pacific meant necessarily less U.S. interests and commitment to Europe – I think that most Europeans have been disabused of that. And actually the – over the past year or so what we've seen in terms of the U.S. – and, I would add, U.S. cooperation with NATO – response to the Russian intervention in Ukraine – I think that those measures of reassurance, increased measures of deterrence, things that you've seen in the Wales summit – I think that's helped, in part, dissipate this sense that this is a zero-sum game and that Europe has been forgotten by the United States, which I think is not the case.

The U.S. rebalance has also had the unintended – I think it was unintended – but positive effect of helping Europeans focus more on their national and their multinational/multilateral efforts within the Asia-Pacific. The term "rebalance," reflecting on the U.S. rebalance, has become a staple now if you look at various white papers that have emerged among European allies, statements from NATO, even from the EU as well, and I think by and large this is a positive thing.

But now for – to get a little bit more granular, I mentioned that Europe is rebalancing in its own way. Whether they've been more clever or more discreet, I don't know, but Europe is had done this and been doing this without affixing a label to it. And perhaps that does have some advantages.

Let's look at a few examples. Germany, I think, has been – Germany's been mentioned several times this morning. They have a not exclusive but a very heavy focus on China. To me, it says a lot that Chancellor Merkel has visited China a half dozen times since she was elected in 2005. Germany alone represents close to 50 percent of the EU trade with China, and two-way trade between Germany and China have – has doubled between 2006 and 2013. There are also approximately 60 different mechanisms, government to government, for contact between China and Germany to discuss issues as diverse as intellectual property rights, cybersecurity, Afghanistan, rule of law, human rights.

Germany's also established or looking at establishing strategic relationships with several other Asia-Pacific countries. And I will just note, because I'm going to come back to it, that Germany quietly but very effectively has put increasing emphasis on defense-related sales, yeah, in the Asia-Pacific, to include conventional submarine sales to the Republic of Korea, India and Singapore.

One other interesting thing about Germany – and I've seen this in other – looking at other European allies and partners – there's an interesting change going on in the foreign ministries of these countries, where more of the foreign – Germany's only one example – more German diplomats are being trained in Asian languages. The postings to Asia are becoming much more important, and a senior German official told me that today it is just as important for promotion for a senior German diplomat to be an Asian expert as it has been over the decades to be an American expert.

Paris – the view from Paris is a little bit different. The French are the only European country to actually have territory and population in the Asia-Pacific area. Now it's not enormous – we're talking about 1.5 million people; we're talking about some islands in the South Pacific, in the Indian Ocean – but these islands give France, because of the UNCLOS Treaty, the second largest exclusive economic zone in the world, second only to the United States. This means resources. This means fisheries. This also comes with security concerns as well.

The French are not as well-placed and as active as the Germans are – they would like to be, I'm sure – in terms of trade relations, but – with the Asia-Pacific countries, but they are significant. French diplomacy is there. There's a very strong emphasis on trade deals that the government led.

One we mentioned before – someone mentioned before the EU arms embargo. This is an interesting case where the French – you know, the EU arms embargo doesn't actually embargo all military-related sales to China, because it leaves to individual nations how they define what "lethal arms" are. And the French, for example, over the past five years – and this is according to statistics published by the French parliament – they have delivered over the past five years about 400 million euros in terms of military-related equipment to China. And the Asia-Pacific writ large is the second largest region of importance for the French in terms of arms sales, second only to the Middle East, and there it's dominated largely by sales to Saudi Arabia.

One more interesting point about the French is that they are only European country that's taken the time – they did this last spring – to actually write up a French view of their Asia security strategy and in particular their security interests in Asia-Pacific, because they do things strategically, they're worried about proliferation, they're worried about Chinese military developments, certainly worried about freedom of the sea.

The U.K. doesn't have the presence anymore in the Asia-Pacific or the – even it can't match the French in terms of even the French modest military assets there. But the British are thinking about this. I think you're going to see more emphasis on looking at what the Asia-Pacific means strategically for the U.K. when they do their next strategic defense review, which will be after their spring elections. And certainly, as demonstrated by Prime Minister Cameron's very, very large delegation that he took with him to China last December, the British are making a play for big sales and attracting investment – Chinese investment – to the U.K.

One other European country that I'd like to mention is a neighbor of Sweden, and that's Norway. Norway's a very interesting example. Norway's the only European country, aside from the French, to have sent a frigate to participate in the U.S. RIMPAC exercises, which is the largest naval exercise that takes place in the world. It concluded this summer. It gave the Norwegians an opportunity to demonstrate trans-Atlantic burden sharing, that they too are also interested in the strategic environment in Asia-Pacific because they know it's important to them, but they also know it's important to their ally the United States. And by the way, by conducting a very successful test of a surface-to-surface missile from that frigate that the Norwegians were able to demonstrate that they too have some military hardware and expertise that could be of interest to a number of Asia-Pacific countries.

I could make some additional comments about the EU and NATO, but I think I'll save those in the interest of time, and I wanted to look ahead a little bit in terms of some long-term suggestions.

One – and I think this is – this applies to some of the European misunderstanding of what the rebalance meant, but I think this will be more important – just as important, if not more important, in the next decade – and this is a gentle suggestion, I guess, to my own government – and that is that alliance management is really quite important and an aspect of that is advance consultations with our European allies and consultations in the sense that we actually sit down and ask them also for their ideas in advance, because our European allies and partners have expertise, different types of expertise, with regard to Asia-Pacific, and I think we could all benefit if we had these conversations before the headlines hit that the U.S. is perhaps making a major strategic shift or at least packaging it as such.

A second point is that in addition to that, some bilateral relations, I think, will be more important than others. The French are particularly concerned or interested in increased military-to-military cooperation with the United States in the region, and those countries that have assets that are ready to deploy them, at least on occasion, to Asia-Pacific – I think they should get some extra attention, and I think they will. The Norwegians are another example.

A third point: What happens in Europe doesn't stay in Europe. And one of the interesting things that we've found in doing this study is the great interest that some of our allies – I'll just mention the Japanese as one example – the interest that they are showing in how the United States and its allies react or has reacted to the conflict involving Ukraine.

The gray zone conflicts in Europe are not the same as the gray zone conflicts in the East China Sea, South China Sea. But they have some similarities about testing, about probing, signaling, deterrence, capability-building. And to the degree I think that an Asian ally looks at the United States and the way alliances work in Europe and says, yes, these things are credible, it can affect their judgment on how credible our security guarantees are in Asia-Pacific.

And the final point is, conversely, what happens in the Asia-Pacific region doesn't stay in the Asia-Pacific region. Asia-Pacific is coming to Europe closer and closer. The Chinese military is participating in the U.N. peacekeeping mission in Mali. Chinese navy units have coordinated in a very loose way but with EU and NATO counterpiracy operations off Somalia. And the Chinese watch very carefully what European and Americans did to evacuate noncombatant civilians from Libya and are interested in that. This – and this is above and beyond – (inaudible 1:45) – security thing. It's above and beyond all of the investment and so forth going on and tourism that you see when you go to Europe.

So in these areas, I think these are all trends that we have to look at to 2025. And we're talking about U.S.-European and U.S.-EU, U.S.-NATO cooperation here. I think there's a lot that we're doing right, but I think we can be a lot smarter about doing it in the future as well.

Thank you.

MR. BURROWS: Well, thank you, Leo. I really appreciated your getting into the individual European countries and their particular assets and views and the importance that they attack to Asia.

I want to turn now to South Asia. And we have really the super-class expert on the – on the region, who can tell us all that's going to happen in the future, bring his crystal ball to bear. That's Shuja Nawaz – is director of South Asia Center. He's been a colleague and friend and been on several of our global trends trips. So he knows all about the methodology and how you can peel back the leaves and see what's really happening out there.

So let us in on the secret.

SHUJA NAWAZ: Thank you, Mat and Barry and my colleagues at the Atlantic Council. Every time someone uses the word "expert" for South Asia, I reach for my wallet – (laughter) – just to make sure that it's still there, because it is really one of the more challenging parts of the world. And in my definition of South Asia, which Fred Kempe very kindly accepted when he asked me to launch the South Asia Center in 2009, I expanded it to what I see as greater South Asia, which includes geographic South Asia, Iran, Afghanistan and Central Asia; and then the relationship of this region to Russia, China and the Arabian peninsula and then, of course, Europe and North America.

So for this discussion I thought I would wider (ph) the aperture than normal for South Asia and then include China as well as the Indian Ocean, because as we look 10 years down the line – and although I've learned a lot from working with Mat, that you really don't make predictions, because predictions have a way of biting you in some sensitive areas when you get them wrong, and so you really are only trying to identify some trends. And the way I have structured my comments is by looking at what I see as challenges and then opportunities.

And I always end with the opportunities because by nature I am an optimist despite the fact that my friend Arnaud de Borchgrave, CSIS, who brought me into the think tank world and taught me everything I know, once told me that a pessimist is an optimist with experience. (Laughter.) And so I'm always very careful when I'm speaking in front of him, as Kathleen will carry the word back to him.

MS. HICKS: I'll let him know.

MR. NAWAZ: So let me first of all just comment briefly on Hans-Christian's commentary, which I thought was spot-on on the need for economic rebalancing of power globally, because that will affect South Asia and the Asia-Pacific. But, you know, having worked at the IMF and the World Bank for 31 years, I can tell you how sclerotic and slow that bureaucracy is and how generously it guards the system.

I was there in 1975 when something called the interim committee was set up. And it lasted for decades because – (laughter) – the system wouldn't allow it to become a permanent committee. And then in the end they financed it by changing the name. And that was the end of that.

So opening the door to let in the Brazilians, the Indians, the Chinese, you know, is going to take a big effort. And what you're going to see most likely are emergence of more of these entities like the South Bank. So you will find people seeking out alternatives to the global financial system in many ways and as India and China start playing a much bigger role on the global financial stage. And they have the brains. They have – you know, Brazil – you bring them together. They have the manpower. They have the skills. They have the resources. And they will – they will not be price-takers. They're going to be price-setters.

Similarly on the military side I think it's worth mentioning that India is now the world's largest importer of arms, which means that it can control the defense markets of North America and Europe at will. And it will be very interesting to see how in the next few years its major purchases force these countries to change their policies on transfer of technology, domestic production, et cetera. So I just wanted to mention that.

And I also agree entirely and empathize with the comment about languages. I think we've – we have had a kind of a vanity that has pervaded our thinking that somehow because we speak English as the global language of diplomacy that's really all that matters. The recent visit by Prime Minister Modi to the United States shows that that has changed. Here's a man who writes well. He writes English extremely well. He speaks it quite well. But he's not comfortable in it. So he chose to speak in Hindi and used an interpreter. I think that's going to be a – (inaudible) – for diplomats going to India. You speak the local language. Diplomats going to China – you know, but how many Huntsmans are there going to be? Not too many. And you can't just fall back on the diaspora population. You really have to broaden the net. And we're not doing enough of that. And I think that's going to be a handicap.

So what are the challenges? In many ways it's a question of plus ca change, et cetera, et cetera. What is happening now is likely to be happening but in a more magnified scale 10 years from now, because 10 years is really the blink of an eye in the lives of these countries. You're not going to see dramatic shifts unless some cataclysmic event occurs, either endogenous or exogenous, you know, some natural disaster, as Kathleen said, which can be for the good and for the bad. It may force countries to collaborate. And I will address that in my comments.

So I see still a tremendous potential for a flare-up in the – in terms of challenges between India and China as the border dispute becomes more entrenched, particularly after India has raised a new mountain corps and has deployed it there. As we have discovered, every time you put troops eye-to-eye and banner-to-banner, things go bad. People make mistakes. And local commanders like to flex their muscles. And before you know it, things escalate, and the escalation ladder is very steep. And before you know it, you have someone occupying someone's territory.

And particularly with very powerful right-wing government in power in India, I think this is going to be very susceptible to seeing a Chinese challenge to its authority and sovereignty. And that's something that will disrupt trade and development. India's trade with China now perhaps exceeds that with the United States. And as services becomes part of that, India's exporting some of its call center work to China. Really you're going to find a greater dependency there, but that'll be disrupted the moment you get into border clashes.

There is still the possibility of a stronger Japanese-Indian economic alliance. But let's be realistic. The trade between Japan and India is still below $20 billion, and it actually went down in the last year from 18 billion (dollars) in 2012 – 2011/2012 to 16 billion (dollars) in 2013/14. So there's much rhetoric still. And Japan doesn't have the capacity, because the demographic shifts that Mat talked about is going to make Japan face an uphill battle in terms of its economic growth. You know, with a population largely of pensioners, what Japan will be able to afford is also going to be a big question mark on their economy.

The big challenge also is going to be how India starts projecting its maritime power. I think India's already talked about the Bay of Bengal. And even as back as 1986, I saw a strategy paper that talked of the necessity of India to protect the littoral states from the Malacca Straits down to the Cape of Good Hope. That's a huge order. But if you look at Indian defense spending, it is primarily now and increasingly going towards the navy and force projection.

India has done some very smart things also. They've settled a border dispute in terms of access to the Bay of Bengal with Bangladesh. I think that's – offers an opportunity for India to apply the same principles, say, with Pakistan on the Sir Creek issue and how they divide rights to the Arabian Sea. But it's not happening as yet. And again, this is one of those very slow-gestating problems that is likely to be around for the next 10 years if we're not careful.

So there is on the challenge side possibility of escalation of conflict between India and Pakistan, greater use of proxies by both sides, by Pakistan in Kashmir, by India in Afghanistan and Baluchistan; and again, with nuclear-armed neighbors, zero warning time, the trend towards deployment of tactical nuclear weapons; and even for Pakistan and for India already the deployment of nuclear weapons at sea, to develop a triad – it's going to create a very difficult situation, something that they're going to have to address, but the rest of the world and the northern hemisphere in particular is going to have to worry about, because if they were to go into an exchange, you've got 17 cities in the subcontinent that would be targeted. And you would have nuclear winter for six months for sure for the northern hemisphere as a whole. That's something that should be worrying us.

With Pakistan, it would change their nuclear policy because when you have a nuclear weapon on a submarine, you don't have this fiction of de-mating (ph) the warhead from the delivery vehicle. So that's going to be an issue.

That leads me to the issue of radicalization of the military, particularly in Pakistan, a trend that we need to pay careful attention to and that as the military continues its anti-militancy operations, which in my mind are likely to continue for quite a while, long after the U.S. departure from the region, you're going to have a greater radicalization and possibility of radicalization.

There is already a well-established network called the (name inaudible). These are people that belong to the same spiritual group and respond to the same spiritual leader, often a civilian. And that undermines military discipline. Overlay that on the recruiting of forces for the Pakistan army, the navy and the air force, all largely from central and southern Punjab, all primarily urban, from the lower middle class, which is generally very conservative, and you have the possibility of greater radicalization over time.

The – there also – the question of centrifugal forces with power moving away from the center. It's already happened in India. It's happened in Pakistan. There may be a shift of politics from dynastic to much more party-oriented ideological politics. In India we've already seen that change. Ten years from now Modi will probably be completing a second term as prime minister and getting ready for a third time. So we have to keep that in mind.

So the center of gravity of politics and economics on the global stage is going to be moving to that part of the world. And I think that's something to keep in mind.

Kathleen mentioned climate change. And I think I just want to cite one number. We had a wonderful half-day conference on Bangladesh last week, and this came up. As the oceans rise, which they will, whether it's the Antarctic or the Arctic – and India's already very active in the Arctic – some 40 (million) to 50 million refugees are likely to occur as a result of this inundation of Bangladesh. And that will lead to refugees on the Indian side of the border. And then what that does to domestic politics as well as the India-Bangladesh relationships is something to worry about.

Lastly in the challenges, I think one should look at the trend of radicalization of the jihadi movements. South Asia is potentially going to become the center of that for the simple reason that the demographics are ripe for it. You have a huge youth population. The median age in Pakistan is 22, in India now is 26. The Muslim population in India is about 150 million. The youth cohort of that, particularly the male cohort, is middle class, lower middle class, cybersavvy, well educated; and increasingly because of India's strong relationships around the globe with the great ability to travel the globe at will. You know, India now has 52 countries where Indian citizens can go without a visa.

So if I was a bad guy, this is my recruitment ground. It's much harder to get a Pakistani to travel easily around the world, much easier to get someone from this community. And there's a great paper that Stephen Tankel recently wrote, which is worth reading, on the jihadist networks in India, you know, the Indian Mujahedin, SIMI, Hoji (ph) – these are networks that operate.

Let me give you some statistics. The Tablighi Jamaat, which is an evangelical missionary organization, allegedly benign, but in fact two heads of the ISI, the Inter-Services Intelligence in Pakistan, were members of the Tablighi Jamaat. One was active when he was in duty. He would actually take a month off and go and proselytize. And the other came out into his true colors after he was removed. And this is all in recent memory.

So the Tablighi Jamaat has its annual gathering. And previously the largest one used to be in Raiwind next to Nawaz Sharif's home in Lahore in Pakistan. Now the world's largest gathering takes place in Dhaka. And it originated, of course, in Bhopal in India. So it's at the periphery of these gatherings that the recruitment takes place. So I see potentially a huge battle between the jihadi networks amongst them, between the IS facsimiles and the al-Qaida facsimiles. I say "facsimile" because you're going to have a proliferation of these groups. And they will simply use the brand name to get recognition. And the more publicity we give them, Western media, the more they like it. So that is something to worry about.

I see salvation, though, I think, in the middle class. And this is really where I go into the opportunities. Currently the seven largest populous Muslim countries are in that region, South Asia and Southeast Asia. And by one estimate the middle class is about 250 million in that part of the world. If you – if you follow Frank Fukuyama's comment in Foreign Affairs a couple of years ago, he says it is most broadly accepted in countries that have reached a level of material prosperity sufficient to allow majority of their citizens to think of themselves as middle class, which is why there tends to be a correlation between high levels of development and stable democracy. So there is some hope that the middle class, civil society, the stronger participation of the business community in politics will turn these countries around, will change their polity from dynastic politics to ideology politics.

U.S.-China cooperation is another wildcard. It's not a wildcard any longer, Mat, because a few years ago the Chinese invited us to discuss this in Beijing. It's now reality. As of this month the United States and China are jointly funding training of Afghan officers, officials. They're coming to the U.S., and then they're going to China for training. So there is cooperation already.

The other Afghanistan nexus will be investment in infrastructure and in the natural resource sector in Afghanistan. With President Ashraf Ghani paying a lot of attention to the resource sector, I think there's a great opportunity for Europe and North America to work with the Chinese rather than against them, because they have the edge. You know, they're in the neighborhood; we are not. And so this may be an opportunity.

There will probably be a much greater public backlash against militancy within these societies. I say "probably," because of again the middle class. As people become more aware of their economic development and want to protect their assets, they will want to do things that will allow them to hang on to their assets rather than be pushed aside by the radicals.

I also see a potential in very real terms for India-Pakistan cooperation on the environment and on climate change and on disaster management. I think the secular shift in the monsoon that we are seeing has already scared them enough. My own center has been running a water cooperation dialogue between India and Pakistan. And this working group has already come up with a very detailed plan for them to work together. Over time we hope that the governments will take notice of it.

And the other disaster management issue is, of course, a nuclear disaster. If any of these countries has a nuclear disaster, unless they are prepared to work with each other, they don't have the resources to cope. We have another track to nuclear issues in which I participate, which has actually brought in the civilian experts from both sides, not the people who make the bombs and rockets but the civilian experts. And they have produced a plan for collaborating on this.

So that is another opportunity that I see. I also see a consolidation and continuation of peaceful transfers of power in Pakistan, India and Bangladesh. And then I end with, you know, the choice of whether the glass is half full or half empty. Sir Hilary Synnott, who was British high commissioner to Pakistan and kept a very close eye on the region, had an engineering background, and he told us at one time it's not a question of glass half full or half empty; the question is, how quickly is the glass growing? And I think for South Asia in particular it's the size of the glass that's going to matter a lot. And that's why I believe that the center of gravity of economic and politics in the world is going to be affected by what happens in South Asia. So we should pay attention.

Thank you.

MR. BURROWS: Well, thank you, Shuja. I mean, that was a wonderful tour de raison of really the landscape and the landscape in 2025, fortunately balancing the negative with a lot of positives.

I want to bring it back a little bit to the Transatlantic Partnership issue and throw out the first question and then involve also everybody else here in the discussion. I thought that collectively the panel really brought out how broad the agenda actually is and that I was struck in the last session, where Geoff was talking – I think rather skeptically – about how you could really broaden out the Transatlantic Partnership when you're talking about Asia. And I thought here we laid out, I mean, obviously trade – and Geoff talked about that in the first session – but we went beyond. Kathleen talked about the military-to-military ties that may be more effective even with the Europeans, dealing with Chinese and just U.S. bilaterally with the Chinese.

Also both Hans and Kathleen and Leo made the case on the institutional reform, which obviously – I mean, these are Western institutions. And I think Congress is a sticking point on the IMF reforms, but Europe also hasn't been that forthcoming, because a lot of what would be needed would be Europe consolidating its seats together, and that's obviously opening up a hornet's nest. So that's an issue that, I think, together we, U.S. and Europe, could work together.

Natural disasters – I thought, you know, here's another area, and Shuja mentioned on nuclear; Kathleen talking, I think, more on the environmental side. But I mean obviously they're going to have to look to U.S. or Europe to help them with these issues. So there's a natural synergy there.

And then I thought – you know, I was very glad Kathleen mentioned the Arctic, because I think actually when you're looking at 2025, I mean, this is really the bridge in many ways between Europe and certainly Asia and to the U.S. And it's also an area where we can establish a huge amount of cooperation, it seems to me, where all the three get together.

So I wanted to throw that out. If you saw that as a way forward, if we are thinking about an agenda, an establishing agenda, is that something – is that the sort of agenda that we should be working? Are there others that I missed or others that you could think of? And then also how to proceed in that – I mean, that's all oftentimes the most difficult part. So anybody who wants –

MS. HICKS: I'll start. One area that I failed to mention, because Hans had brought up urbanization – I actually think that that's a great place for the EU to help provide development assistance, because that urbanization obviously brings a lot of challenges that eventually get to the security sphere, but certainly at the human security value no matter what. So I'd just add that to the list.

But I do think as you – there's a very healthy agenda. That's not the problem. I think the issue is, what is the appetite, what is the attention span, where will Europe be looking. And I will turn to my right on that. But I think the opportunities are certainly plentiful for both the U.S. and for Europe.

MR. HAGMAN: Well, thank you very much. I'd like to raise, which Julia did, education, how super-important that is long term. We're seeing the – and it's this issue of competition but also getting the best and the brightest minds to solve big problems, to lower thresholds across the Atlantic and work together. And if (we ?) can get new ideas, maintain an edge, creative edge, that will also help to solve a lot of the world's challenges. We're talking about energy storage, flows, et cetera.

I would like to mention just on the Arctic – I mean, the Arctic is very important and especially if you're located in Northern Europe. But if you want to use the Arctic, you have to have a functioning, working and cooperative Russia. If you don't have that, it's a long way to go it alone among the icebergs. You don't want to do that. So it depends a little bit – not only a little bit – quite a lot on how Russia develops. And fortunately, as we just touched upon previously, the trends in Russia are not positive. This is not good. It's everybody's neighbor. It's Japan's neighbor. It's China's neighbor. It's your neighbor in the United States. It's our neighbor in Northern Europe. And it's not moving in the right direction.

But we need a cooperative, safe Russia in order to transport by and use that route.

MR. MICHEL: Thanks. I would mention two areas. One, Shuja touched upon, and that is the nuclear issue in South Asia. We have three nuclear powers, obviously, in the – in the NATO alliance: The United States, France and the U.K. All of us have strategic-level discussions in different fora with Pakistan, with India, also with China. I think a little bit of informal consultation about the types of messages that we deliver individually to those countries that would be reinforcing, both in terms of nuclear weapons security, also in terms of nonproliferation – I think that would only be helpful.

The other thing I think that's useful is an appreciation that we can have separate but parallel messages with European allies when they deal with our – some of our Asia-Pacific allies and partners that would actually be quite helpful. And I'll just give you one example. And I hope this isn't, you know, going to betray me as too much of a Francophile here, but if you look at a communiqué that the French and the Japanese signed – I think this was in February of this year – where they had the "two-plus-two" meeting, meaning their defense ministers and their foreign ministers from each side spent a couple of days together – and I don't know that it exists in English, but if you read the communiqué, the – it's very wide-ranging. It touches on issues of freedom of navigation, peaceful resolution of territorial disputes. It goes into nonproliferation. It speaks about peacekeeping operations and so forth, ranging from South Asia to – into Africa – a very interesting document. And I don't know if there are any French diplomats here, but frankly if you were to strike "France" from that communiqué and insert "the United States," I doubt that many people in Washington would have any difficulty at all with what they said.

It's very interesting, and I think it's very helpful. And if you read the Japanese press – I did in translation on this – it's very helpful for a U.S. ally in Asia-Pacific to hear reinforcing messages from another ally that's not the United States. And I think that's something that we can appreciate and even discreetly encourage.

MR. NAWAZ: Just wanted to add two bits of information. One, I think on urbanization, probably half the world's megacities are going to be in Asia. And that's – it's not just the urbanization but the – what they call conurbanation. There are just whole swaths of territory that are urbanized now; it's not just one city at a time.

The other is – and I had asked Mat, because I couldn't be here for the morning session when China was discussed, if the so-called "string of pearls" was mentioned. And surprisingly nobody mentioned it. So let me mention it now if only to debunk the idea, because what China appears to have is the equivalent of "string of pearls," but on the economic side, which is to develop these ports and footholds, whether it's in Bangladesh or in Gwadar, which would allow it to project economic power and set up manufacturing bases so that it can reach wider markets in that region in the Middle East and in the Indian Ocean area rather than what would be militarily extremely vulnerable and downright stupid to have such a long line of communication, to have frigates and destroyers and submarines and aircraft carriers wandering around all the way from China into the Indian Ocean.

So it's curious that, you know, people don't talk about the "string of pearls" in China, and I think there's a good reason for it. I just wanted to mention that.

MR. BURROWS: OK. I'm going to throw it open. And I think Julia – did you want to start us off?

Q: Julia Chang Bloch again. I have a comment and a question. I think Hans – you mentioned, you know, talk, that we must convince China and Asia of the profitability of Western norms. And Kathleen, you reinforced it by saying that we must demonstrate their value.

I don't think it's as simple as that. From my understanding of China and the Chinese worldview, China looks at this from the perspective of their hundred years of humiliation, when the Western powers dominated the world; and then the postwar, -World War II institutions and norms were set up when China did not have a place at the table.

And now they have a place at the table. In fact, the tables have turned or maybe are turning. So they want not just profit and benefit, because I think no other country in the world has benefitted as much from those post World War II institutions and values. And I think Xi Jinping's floating of the great power relations theory addresses that point. China wants their place in the world and their voice to be heard.

So my question is, who in our European and American leadership are giving these kinds of issues some thought? Because I haven't – certainly from the American side I haven't seen it yet.

MR. BURROWS: Thanks. We're going to – because of the time here, we're going to gather a couple questions and then get each of the panelists to answer them.

Hans – the other Hans.

Q: Actually my question isn't a bad follow-up for Julia's. What I wanted to get the panel to think a little bit about is the China-Russia relationship and where it's going over the next decade or so. There is a list of about a dozen commonalities in their behavior with regard to territory. There's both in the Shanghai Cooperation Organization. They both are presenting narratives that are contrary to the Western liberal democratic, market-oriented narrative. They're both very good at hybrid warfare. They both are presenting A2/AD problems to our Defense Department, et cetera.

I mean, one of these nations is obviously in ascendency. The other one is potentially in decline or certainly not in ascendancy. There are a whole array of reasons why Russia might want to partner with China, but there are similarly a long list of reasons why the Chinese may not want to partner with Russia.

On the other hand, you know, where – so where is this going? I think the United States has the opportunity to prevent what might be a very dangerous coalition. On the other hand, it might force them together with the wrong set of policies. So maybe giving China a place at the table is the answer to this question to prevent them from developing a real – something short of an alliance but high degrees of cooperation, which could be dangerous to us.

Then – so that's the general question. If this moves in the wrong direction, one of the answers to that is stronger trilateralism, is developing stronger relationships between the United States, Asia and Europe together on the military side, on the economic side if we end up facing that kind of a new challenge. So –

MR. BURROWS: Great. Jerker.

Q: Jerker Hellstrom with the office of strategic analysis at the Swedish government offices. I'd like to also mention another bilateral relationship, being the relationship between China and India, who will be the big growth drivers in Asia in the coming decade. And Kathleen, you mentioned India as the big wildcard in this decade and during this period. And I think that in terms of what China will be in these 10 and 11 years – we don't really know in terms, for example, of military capabilities and what China wants to do with its military capabilities.

What we know is that China wants to use its armed forces to protect its territory. And we mentioned East China Sea, South China Sea of course. And Shuja, you mentioned the border dispute with India.

But at the same time we're talking about growing trade as a factor to stabilize relations and stabilize regional security. Not least in China there's a strong belief that growing trade will stabilize relations and dampen the risk for conflict.

But so far we're not really seeing that. And maybe we're even seeing the opposite. We have a record trade deficit with India and its trade with China, now $31 billion U.S. dollars in 2013. And so that's more of a growing concern for India on top of its concerns with China's growing military capabilities. So – and there is an underlying issue of mutual mistrust. China does have mutual mistrust in basically all of its bilateral relations and especially so with India.

So my question is, where do you see China-India relations developing in the coming decade? And in the absence of institutionalized confidence-building measures, is there a role for the U.S. and the EU to play here? Thanks.

MR. BURROWS: (Off mic) – questions before I turn to the panel?

Bob.

Q: Yeah, I just want to follow up – I'm sorry – I think one trend that no one's mentioned is the – is the fact that in Asia, economics and security are moving in precisely the opposite directions. You see continuing economic integration both at the dollars-and-cents level and at the institutional level. And at the same time there's more potential for conflict. Last year Asia surpassed Europe as the leading place of military spending. And you see all throughout Asia everybody bandwagon-ing both with the U.S. and with each other for fear of Chinese intentions.

And I guess the question is, how do you reconcile the – I don't know that it's sustainable to have both over time.

MR. BURROWS: OK. The – none of these are easy questions. (Chuckles.) So Julia's on China's place in the world, but I think as important is who in the U.S. administration or in Europe is looking on the world – through or understanding how China looks on the world; Hans' with Sino-Russian relations, where that's going, what the Transatlantic partnership may do in order to dissipate any strengthening or actually unintentionally strengthen that relationship; Jerker on China-India relationship in the – in the future; Bob certainly adding onto that about the growing distrust despite the increased economic interdependence.

So you – we have just a few minutes. I'll give, like, what, three minutes to each to answer those. All right. You can pick which ones you want, but hopefully we'll cover all of them, somebody in the panel will speak to them.

Kathleen.

MS. HICKS: Sure, I can start. I think there are a lot of people thinking about China's place in the world. The fact is China has a seat at the table for every one of the institutions I can think of. And certainly the Clinton-era – Clinton-era WTO, you know, debate and ascendency of China seen even then and the continued policy that's largely bipartisan in the United States to view China as ascendant, as an important player, as having a seat at the table, which it does. Again, in all these forums, I think – it's extant.

I think the big question is how will China use its seat at the table. And that's where you get into trying to draw the Chinese out in terms of how they would like to view their role in the world, what do they think needs change. And what I'm suggesting – and I certainly agree with your initial point that nothing is ever that easy – is that, you know, that so far they are benefitting from the system largely and can you continue to make that case in a way that dampens any desire to overthrow that system for some other system that's out there.

China/Russia – my quick answer is it is a wildcard. I think it's highly unlikely, particularly if we have a 10-year time frame that we're focused on here. There's a lot of mutual suspicion. I think someone was pointing out the mutual suspicion in such relationships that China has with its neighbors. There is incredible suspicion of the – from the Chinese of the Russians. I think there will be opportunism. I think particularly when you're outside of a bipolar system opportunism runs rampant. We do it in the United States, and others should be expected to do it too. And you'll see that. You'll see instances of the Chinese and the Russians finding common cause economically, energy, et cetera.

But I don't see that as extending into a grand alliance, if you will, to include globally on the security sphere. But it's something that should definitely continued to be watched. And I agree that U.S. policy – I don't – I think you used a phrase like the U.S. could prevent that maybe, something along – I don't – I'm not sure I agree with that, but I think out policy matters in terms of how likely that outcome is.

China/India – I'll defer to my colleague. I've already said I think there's – India is a big player, and I think you've started to point out some of the China-India tensions there. The issues, I think rightly raised, that you have, of course, this overriding tendency in the security sphere of the contrast of the balancing behavior against China thanks largely to China's behavior that has caused balancing, which would not have existed had they not acted in that way and the desire of states including the United States, certainly the regional actors, to have good economic relations because China is a large trading partner for many of these countries. That tension, I think, actually will continue. It – maybe it is unsustainable in the long term, but I think that the issue really is how does – how do we draw out China's ultimate security desires and how do we stabilize that situation.

So I do think that that's an underlying tension. I'm not sure I think it's one that will have to go away, if you will. It would be nice if it goes away, and we should work toward that. But I can see that sustained tension over a period of time unless and until there is a general, clear understanding among the parties about the desires of China, the desires of the United States and the regional actors and how those can combined. I suspect that kind of clarity will not present itself certainly in the next five years. Maybe, again, miscalculation could lead to a crisis that pushes along that agenda perhaps in a positive outcome way but perhaps not. And then that risks the economic relationship.

I'll stop there.

MR. HAGMAN: Well, thank you. Just as a follow-on to Julia, I think that it is important to recognize the Chinese mindset, the Chinese context but also the Chinese potential. And certainly there is a seat at the table, but we're better perhaps to modify current institutions and to try to reinvent – or try to create new fora where there is a broad understand rather than having a complete mishmash of some dinosaurs and some which are completely new without any legitimacy. That could be a very messy road forward. So I would advise more adaption rather than recreation.

On Hans' question on China/Russia, we are sometimes fooled by the map. Russia is one-tenth of China's population. It is one-sixth of China's economy. And it's half of China's defense budget, the Russian versus the Chinese defense budget. And just 10 years ago, the relationship was the reverse, wherein Russia had twice as much defense spending as China. And if you just look a little bit towards the 2025, give or take a little bit, Russia's economy will probably be somewhere one-eighth to one-ninth of China's economy. And that's a pretty positive estimate for Russia and a pretty pessimistic estimate for China.

So it is very different. And China's a super-diversified economy, which Russia is not; it's a mono-economy. The investments in education, in innovation, even health believe it or not and infrastructure is just different worlds.

So I see the only way that China and Russia will really bond would be if there would be a confrontation with the United States; and Russia, which is in a corner and painted itself into a corner, finds no other way to have a voice rather than to be a global spoiler. And that would be one way of doing that. Otherwise I see that China has a very, very clear view what Russia is and what Russia is not. They appreciate the political stability perhaps. But apart from that and so many other elements, it is a deliverer of raw materials. And we see more and more China – it is a buyer's market. And it's up to Russia to essentially rebuild its whole energy infrastructure and move it east and then at the border to China. Then it's the global markets, which are active. And if the price is right and the quality is right, China will buy it. Otherwise Qatar will compete. And it's new China, which is much tougher vis-à-vis – and also just look at the relationship between Japan and Russia with the U.S. shale gas, being able to cut the prices just because of a promise sometime in the future to get.

Yeah, so I think that – we hope that Russia will get out of its funk, but it's not looking good right now. And I think the idea of maybe it's more of a grand bargain, cooperating with China, which could be of interest, I think, yes we have the human rights, yes we have all the issues and yes we have the military aspects. But it's not impossible.

MR. MICHEL: In response, Madam, to your question or observation, once again, based on this assessment for which we conducted, I would say, close to 50 interviews with some very senior officials in Europe, there is definitely expertise within European foreign ministries, defense ministries, intelligence agencies and nongovernment think tanks on China. And I think we could – the United States could benefit from a better, more structured dialogue with those European partners on exchanging views and information on China.

We don't – I don't think we have all of the answers in this country. We have some very good resources, but we could benefit. And the Europeans – some of the Europeans do things that we don't do. For example, in the premier British professional military education system at Shrivenham, the Defence Academy of the U.K., they include the senior Chinese military officer in one of their long courses. He happened then – I think if I got this correctly – after he finished the course at Shrivenham he went on to become the commander of their newest aircraft carrier.

These are connections that some of our – at least some of our European allies are making that the U.S. doesn't have. So exchanges are beneficial.

Now, I'm not the Asian specialist. It was really my partner on this. But something that was – that he's mentioned to me and I've heard elsewhere, it's not only, I think, the question of how the United States interprets or misinterprets what they hear from Chinese officials. And I think he was telling me – and you could correct me if I'm wrong – it was perhaps the Chinese foreign minister at a recent meeting in Southeast Asia, was addressing – I think it was a Malaysian official. And I'm paraphrasing him, but basically told him, look, we're big and you're small; get over it.

So it's not only the United States who can have some questions about Chinese messaging from time to time.

MR. NAWAZ: I just wanted to add on the regional organizations I think China apart from the Shanghai Cooperation Organization, other regional organizations like the Economic Cooperation Organization, China will be playing a role. But I think it still wants to be recognized in the Bretton Woods institutions in a much greater manner because it wants to be seen as a member of the club. And they've negotiated positions for themselves even at the IMF on that basis, much earlier at the World Bank. So that trend will probably continue and offers an opportunity.

On Bob Manning's question, I think it's because the baseline of military spending has been relatively small compared to the West that you are going to see an increase in spending in both India and in China. But I take heart from the recent communiqué and the exchanges of Xi's visit to India, where they decided that they would set aside their differences and talk about economics. It'll still be a long haul before India manages to balance that relationship. But India accepts it as part of the global economic scene. And I think China accepts that too. If China can get to invest in Indian infrastructure, then it's a win-win for both countries. And I think that's probably the way these two leaders are looking at it.

Interesting congruence of their term that, you know, they both come into power recently and they're both going to be in power, they hope, for some time. And that gives them an opportunity to build on this first exchange.

So I'm less worried about the potential conflict there. But 10 years down the line you don't know what may happen. And maybe the glue that'll bring them together is working together on the environment, on climate change. The Chinese have already offered to become part of the water dialogue in South Asia, because they are the upper riparian to all the countries, including Pakistan and India and Nepal and Bangladesh.

So they do have the upper hand in that sense, and they will want to play the role of regional hegemon. I think that's something that will happen. But whether they will project their force way into the distant (sic), I doubt very much.

MR. BURROWS: Well, thanks to the – all the panelists. It's a great discussion. We haven't settled a lot of these issues, but we have another half day here to get at them. But thanks again. I think it was a truly rich discussion. (Applause.)

(END)



RELATED CONTENT