 Good morning, everyone. Welcome to CSIS. My name is Matthew Goodman. I hold the Simon Chair in Political Economy here at CSIS. Delighted that you could join us this morning for this event on economic statecraft. I also want to welcome our online viewers. We have quite a following online. I was in Asia last week and found out that we have a lot of a big fan club out there that stays up late into the night to watch our events, so welcome to all of you. I want to thank our sponsors, Prometary Financial Group, and other sponsors who prefer to remain anonymous for supporting us in this project. And I also want to thank the advisory group, about a total of about 20 people who are mentioned in the acknowledgments of the report that I hope you got when you came in, who were very helpful in providing us input and advice based on long experience working in economic statecraft, whether at the State Department or at other agencies of the U.S. government. And they were terrific and very helpful and we really appreciate their input. So I'll introduce our panelists in just a second, but let me just frame this by saying that economic statecraft is a topic that will strike some people, perhaps even some in this room, as a fairly wonkish kind of Washington-like topic. And I understand that, but I think this is a really important issue because foreign policy is economic policy, as somebody recently said, Secretary Kerry, and countries are amassing economic power and using it in the world and the United States, still the largest economy in the world, plays in that space and we certainly use our economic power in the world. But we need to, you know, we need to up our game. We need to sharpen our game in the face of these changes in the international economic environment and these new emerging players. And so the way we do economic statecraft is really, really important. And we at the Simon Chair are really focused on elevating this conversation about economics and foreign policy and we intend to do a series of reports on different aspects of this topic. We decided to start with the Premier Agency of U.S. Foreign Policy and the first in the Cabinet Protocol Order, the State Department. And so this report that you received, the short 13-page report, is focused on the State Department but as I say, it gets kind of into the plumbing and the mechanics of the State Department, but please bear in mind that this is part of a broader project and a broader focus on very important set of issues that I think the State Department is a very important element of. And so we are very excited to be launching this report today and to have all of you here to have this discussion about what the State Department does well and what it could do better in economic statecraft. Okay, with no further ado, I'm going to introduce our panel. You have biographical packs so I'm not going to go into great detail, but to your far left we have Bob Pollard, who is a State Department visiting fellow in the Europe program here at CSIS. Bob has long experience as an economic officer at the State Department and you can read about all of his esteemed work in this area in the biographical data. Next to Bob is Greg Hicks, also a State Department visiting fellow here at CSIS in the office of the President. Greg is also an economic officer at the State Department and has actually between the two of them they have over half a century of experience working on economic statecraft and other issues at the State Department, so we're delighted to have them both here. They are also the primary authors of this report. Let me stress that they wrote this report in their own personal capacities and the views expressed in here are theirs and not those of the State Department or any other institution. And then right next to me here is a familiar face here at CSIS, Clay Lowry, who is Vice President at the Rock Creek Global Advisors Group and also a former colleague of mine at the Treasury Department. He was ultimately Assistant Secretary of the Treasury for International Affairs and Clay is going to give, has many years of experience working in economic statecraft and with the State Department, so he's going to be our discussant today and comment on Bob and Greg's presentation and on the report. So I think with no further ado, unless there was something else I was meant to say at the beginning, please do turn off your phones and set them on stun or otherwise silence them and we will go straight to Bob. Good morning. First I wanted to recognize Carla Hills, former USTR. We worked together a long time ago. Some 22 years ago a Tifa in Singapore the first time I was found at that. I guess I'd have to say that Miss Hills was my favorite USTR, so I'm especially pleased to see her here. I wanted to say how honored, truly honored I was to serve with the distinguished panel of experts on this project and to work with Greg Hicks as co-author. And I also especially want to thank Matt Goodman, who's really the guru of this project. He acted as an excellent advisor, contributor and editor and even sometimes as a judicious referee when that was needed. I'm going to focus on the report's critique of state's performance and the interagency process as it relates to state. First the panel of experts was united in the conviction that international economic policy is a central part of foreign policy and not a standalone entity. Putting it another way, economic policies should be designed to promote strategic international objectives just as foreign policy is often designed to support commercial interests. What is more the advisory group agreed that the State Department has a key role in economic diplomacy, but that this function has suffered a downgrade in recent years. Changing that will require strong and sustained leadership and intervention from the Secretary of State himself, the group included. Hence the experts welcomed the initiatives by Secretaries Clinton and Kerry to revisit the question of state's role in foreign economic policymaking. The overall assessment was that despite its many strengths the State Department is underperforming in the area of economic diplomacy. In particular observers sharply distinguished between state's performance in the field and its performance in Washington. What we have labeled the American Embassy brand and the Foggy Bottom brand respectively. First to the American Embassy brand, overall state economic experts received high marks for their commercial advocacy, their language aptitude and cultural skills, their timely analysis of economic developments in the host country and their assessment on how to achieve U.S. national interests. Our advisory group praised state officers for their reach that is to say their comprehensive contact with the full range of host government officials, business, civil society, universities and NGOs in over 200 posts abroad. This reach, the report notes, gives state officers an unequaled understanding and feel for the policies in the host nation for how their interagency functions and for what buttons to push to get results on economic as well as other U.S. interests. Leadership state officers bring a whole of government approach to the country team integrating political, economic, military and cultural perspectives into a unified foreign policy. In many places too, state acts as the eyes and ears of other agencies such as USTR, Treasury and Commerce that may not be present at post. So there in brief is the good news about state's economic function. But I suspect that that's not why most of you are here. You are here to hear the bad news. And I can assure you that there's plenty of that in the report too. And that brings me now to what we call the Foggy Bottom brand. In general we heard state is not very effective state often appears more knowledgeable of and even sympathetic to the views of foreign governments than US interests. In other words it is guilty of clientitis, the critics charge. In fact the regional bureaus at state that dominate policy making often subordinate economic considerations to things like political, military and counter-terrorism priorities as well as lesser matters of the moment. Another problem that our panelists noted is that the senior leadership in the department often does not fully engage in the inter-agency process on economic issues. Further state economic officers often do not have the same economic expertise as their counterparts in inter-agency. As a result state tends to bring weak economic analysis to inter-agency meetings. To compound the problem foreign service officers who after all spend the majority of their careers overseas are often not skillful players in the bureaucratic politics of Washington compared with their more seasoned colleagues at Treasury, USTR and Commerce. Further the state department is divided into so many bureaus and fiefdoms that it can take state a long time to coordinate a unified position in inter-agency meetings and to clear on policy decisions even relatively minor ones for reasons that often have to do with more to do with bureaucratic haggling than substantive policy reasons. So our report describes state's failings in great detail. As authors our duty was to faithfully report what we heard. Even if we did not agree with all of the criticisms we had to acknowledge that there certainly was some truth to many of them. That said a number of state officers past and present had strong reactions to some of these allegations. Naturally state officers bristled at the charge of clientitis arguing that they very well should offer policy guidance based on their insights into a foreign government's motivation and interests. Another common reaction was that no matter what the state department does to reform the economic function in house it will not matter that much unless there are significant changes in the inter-agency process as well. Now as it happens a number of the advisory experts raise the inter-agency process specifically as it relates to state. Let's start with the NSC's role. Our panelists noted that the NSC has increasingly sought to concentrate decision making into its own hands and has become more and more involved in foreign policy operations rather than delegating authority to responsible line agencies like state. A report did not address whether this was necessarily good or bad but did note that the NSC has not always effectively coordinated and managed the inter-agency process. The perception among state officers, for example, is that USTR and especially Treasury often tend to hoard information, protect turf and to keep state and the rest of the foreign policy apparatus in the dark in what they're doing. Now this perhaps would not matter if this tendency to go into loan invariably led to optimal policy choices. But several of our advisors believe that this was not the case and that this is something the NSC needs to fix. And to be clear it's not just Treasury and USTR. Many US agencies including the NSC communicate directly with counterparts in foreign governments without informing and engaging the help of the embassy sometimes not even the ambassador who is after all the president's personal representative. So does it really matter? Yes the report points out because it means that much of the value of what we have called the American embassy brand is often squandered. And it means that state can't do its job well in Washington as well. Policymaking can be improved for example when state is able to bring its expertise fully to bear on what makes a foreign government tick and how that country is likely to react to US policy initiatives. From a managerial point of view alone this needs to be remedied. So in conclusion this report says that improving the state department's economic function will require significant changes both within state and in the interagency process. Now over to Greg and thank you very much for your kind attention. Good morning thank you for coming and thank you Bob for terrific first half of our presentation. Before continuing I too would like to thank Matt Goodman for his leadership on a key issue for the success of our country in the 21st century. For those of us who have had the privilege of working with Matt previously his leadership and his passion for international economics are both expected and appreciated. Likewise I join Bob in thanking our advisory panel participants for their contributions to the product. We could not have completed the paper without their wise counsel. And so on to the second half. Now sorry no whistles. Before discussing the report's recommendations we thought it would be useful to talk a little bit about how we looked at the problem and in this regard I would like to especially thank SSIS shoal chair Scott Miller for his insights which led us to expand our horizons and view states role in crafting economic policy also from the perspective of private business. Having identified states strengths and weaknesses we asked some fundamental questions. What does state need to do to improve its brand? And how can state capitalize on its comparative advantages to improve the quality of its products and services? Our panel of experts all stressed the importance of leadership at state. Both Secretary Kerry and former Secretary Clinton have emphasized that the international economy had to factor more importantly in our foreign policy. Former Secretary Clinton's economic statecraft initiative revitalized embassy support for American businesses. And she led by example advocating on behalf of Boeing and other American companies on numerous occasions. On the policy side she strengthened our economic diplomacy with China through co-leadership of the strategic and economic dialogue and with the EU in efforts to toughen sanctions on Iran. For his part Secretary Kerry's first speech at the University of Virginia in February 2013 clearly indicated his desire that economic policy figure more prominently in states foreign policy toolkit. And his team is working hard to broaden Clinton's economic statecraft initiative. But world events requiring the intervention of the Secretary of State have a habit of constantly demanding personal attention. So our experts also stressed the importance of leadership from the Under Secretary for Economic Growth Energy and the Environment or E in states internal vernacular. The person in this position who sits within the state bureaucracy at a level that can convene every State Department actor involved in economic policy must have clear authority from the Secretary to coordinate foreign economic policy work within state to craft unified state views and to represent them to the interagency. E must also have the ability to delegate this authority to other appropriate state officials as necessary. Of equal importance as several of our advisors observe US international economic policy has been at its best when E and the Deputy National Security Advisor for International Economics have had a close working relationship. State performed best several individuals mentioned when the Deputy National Security Advisor for International Economics regularly convened top level meetings that brought the Economic Under Secretary together with senior counterparts from the other major economic agencies. At the working level our panel consistently praised states past exercise of convening authority to bring representatives from all relevant agencies to the table and to find integrated policy solutions to international economic challenges. This practice has much merit and thus we recommend that the NSC designate appropriate regional economic deputy assistant secretaries to chair standing interagency policy committees on foreign and economic policy integration. The report underscored the importance of US ambassadors to the successful crafting and implementation of foreign economic policy. Both in advocating for US businesses and in coordinating whole of government policy interventions with foreign governments. Good ambassadors don't learn these skills in their sleep. We have acquired through working with interagency colleagues over many years and from actually leading interagency discussions to sensible policy conclusions. A thorough background in economic and commercial policy is also important. We strongly recommend upgrading economic and commercial policy training for newly appointed ambassadors. Organizationally our group reached the conclusion that capitalizing on states international reach requires more effective economic policy work from states regional bureaus which provide primary connectivity to our overseas posts. Thus we strongly recommend that each regional bureau appoint a career foreign service economic officer to a deputy secretary deputy assistant secretary position. Give primary responsibility for the bureau's economic policy work to that person and stand up a regional economic policy office to support the bureau's economic work. States bureau for Western Hemisphere Affairs served as our primary example for this recommendation. Within the economic bureau we recommend that at least half of its deputy assistant secretaries should be career foreign service economic officers. And in response to views coming from the business community we believe that states coordinated from four business affairs should also be a career economic officer and that the position should be designated as states main point of contact for commercial services and support. As important we recommend changes within the state personnel system that would improve recruitment training and incentives for states foreign service economic officers. Inclusion most of us here grew up in a world that has been largely described as bipolar. Today's world is multipolar. It is more complex and more competitive than any America has previously experienced. At the same time the U.S. economy is more connected to the global economy and therefore more dependent on it than ever before. Our competitors and strategic allies alike Brazil, China, the European Union, Japan India and Russia are seeking to amass economic power and to deploy it as a leading element of their foreign policies. In many cases they are seeking strategic advantages through these efforts often at the expense of American interests. Russia's diplomacy and support of its Ukraine policy is a perfect example. America's success in the 21st century will depend on our economy's ability to remain globally competitive. This will require the U.S. government to identify and to implement the right foreign economic policies. The State Department has a central role in that effort. We believe the recommendations in this paper if adopted can enhance the State Department's effectiveness and America's ability to compete globally. Thank you. Thanks, Greg. You want to stay there or you want to go? You're out there. Hold it. You're going to sit there. Go ahead. First of all thank you all for having me here and thanks to Graham Bob for their excellent report. I served for about 16 years under the Treasury Department of Economic Policy Making Space primarily. Which means actually it means probably that I did about a year and a half of going to meetings, doing some analysis, writing a memo every now and then and trying to actually think about what I could do to help the taxpayer. And then I did about 14 years of bitching about the State Department. And six months of fighting with USTR. So that was kind of my take on the whole thing. And when Secretary Clinton gave her speech in 2011 on the importance of economic statecraft, I actually did talk to people at Treasury about it. And they wanted to know my views just as somebody who had been around for a while. And I said I thought it was an excellent speech and an excellent presentation if they were serious about this. And one reaction I got from some was you mean even the chief economist role over at state. And I'm like well I don't really care how state actually does their bureaucratic fixes. And yeah, it would be great for state to have a chief economist, it was my view. And not because, look I actually get that Treasury is a turfy place, but it is because State Department is our foreign policy voice in the world. It is our day to day base around the world. Economics and finance and trade and investment issues are one, very complicated. And two, are most of the time very predominant and very important to how we think about our foreign policy. In Secretary Bob Rubin's book that he did about his time when he was at the Treasury Department he talks about the importance of the ambassador in Korea. Understanding, not being an expert on, but understanding the importance of a balanced payments. Understanding what is a banking system, how does it really work in function. Not because he's ever going to understand anything to the degree that Bob Rubin, who had been 25 years or whatever it was on Wall Street would understand it, but because he could have a communications. It gave Secretary of Treasury a lot more confidence that what he was saying to the Koreans and what he was saying within the government was being understood across the US government. And that actually just underscores kind of the importance that people at Treasury at least I think of as figure out that State can help with. Let's take today's world right now. Secretary of State Madeline Albright just said the other day, it seems like we got a bit of a mess out there. That's an understatement. So what are those messes? Let's take two things that are most prominent. One is what is happening between Israel and Hamas. Okay, so we know that there is decades of history and political tensions and so forth that are going on there. And there are specific matches that struck the fire that has kind of gone, happened. But the core issue in many respects is an economic problem. One, bad policies. Two, some of their routes have been cut off from Egypt and in Israel for a variety of reasons and I'm not getting into what happened. But it has created a big problem and so then what is the solution to that problem? Fire rockets at each other. And so that understanding the macroeconomic trade and investment issues behind what is happening there is key to understanding how to fix it. That's something that State Department needs to know and must have experienced. In the Russia-Ukraine example that's going on right now largely I think that the problems are what's happening are not economic. However, what are the tools and solutions that are being thought of are almost primarily economic? How do we get sanctions that actually bite on the Russians so they can stop this behavior? How do we work with the EU which has lots of economic ties and market ties to Russia to basically do some of the steps that we would like them to take which are very difficult for them to take. These are primary issues about trying to understand the importance of capital flows, the importance of where do sanctions actually bite and work. And that is something that yes, Treasury Department is going to be very helpful on and the Commerce Department can be very helpful on. But the State Department actually is probably the key agency. So I had three points to make. My first point was the one that I've been making I think which is the importance that economics and finance and trade and investment have in our foreign policy setting. And why we need to have State Department officials and frankly even other government agency officials more knowledgeable on. In fact the only reason I ever did some teaching at Georgetown University and I taught foreign service students, I didn't teach economics, I taught foreign service students, was because when I was at NSC sometimes I sat in meetings with people who were way smarter than me and certainly way smarter than me on foreign policy issues whether they are at the Defense Department or State Department or maybe one of the intelligence agencies. And their knowledge sometimes of finance and economics was actually not very good. They thought of the IMF as a giant ATM machine and that's not what the IMF does. And so how do you try to, so that was my view. I never thought about teaching my life because I didn't think I would be any good at it but I just thought and I didn't think I had enough knowledge to teach anybody anything but I thought this was something I could help some people with who have a deep interest in foreign policy but are scared of numbers. And so let's try to figure out how do you not be scared of numbers. That doesn't mean you have to do econometrics like a Nobel Prize winner. It means you have to be basically not be scared of numbers. My second point I wanted to make because it got brought up a little bit by Bob's presentation is primarily I have a very good experience with the State Department on economic issues. I mean yeah Treasury and State fight all the time but I mean that's a different perspective on how to look at the world. I think that if I had a criticism it would be tell State look don't try to do everything. But you know I remember I used to go in 1999 every month to Paris and that's not such a bad thing I guess. Every month to Paris to do Paris club negotiations with the State Department colleague. I mean we literally held hands we practically slept in the same bed I mean we went and just went together and did everything together and it was vital for us to be on the same page because we were negotiating on behalf of the United States of America. And so I had great experiences with that. I remember back in 2008 we're in the middle of the worst financial crisis you can possibly imagine in this country and so Treasury Department individuals were a little busy. And the country of Pakistan was clearly getting and had gotten into financial trouble and it was actually I'm patting the back of my colleagues not myself at Treasury who were the first people to really pick up on this and figure out that this was a true bounce of payments crisis that was going to happen. The IMF was actually slow on this one. And we worked that issue very hard. At first many of the State Department people had probably a little the clientitis. No this is Pakistan we got lots of important issues. Our point was maybe we do have important issues but they're going down and they're going down if we don't fix these problems. And then once the State Department people had heard the analysis thought about it and that's not the analysis they should be doing. It's an analysis Treasury should be doing. And we're so helpful at trying to figure out what is Saudi Arabia really thinking about these issues? What are the Pakistan's really thinking about this? Why is this problem happening? And we worked that instead of basically saying let's just write a check to the Pakistanis which I promise you that conversation happened. It was much more how do we get them to take steps to fix the hole and stop the hole from filling up. And then we can help fill up the gap through financial issues. I just saw Kurt Tong walk in. I recall the US-Korea free trade agreement negotiations. I was in the middle of dealing with a very tricky issue on investment and currency type of issues. It was knowledge of people from State Department and USTR that helped me in my role as the Treasury Department official to actually do what I thought was a great job, not because of me, but because of the overall team effort on getting a very good free trade agreement which I think will be in the interest of the United States in the long run. Are there negative experiences? Of course there are. I recall one time a negotiation with one of the multilateral development institutions in which a State Department official, we were taking a very tough line in the negotiation and the State Department official literally was blurting out our instructions practically to another delegation because they didn't think that we were playing the diplomacy correctly. That obviously is not called for. But those were the rare exceptions. And I thought that the main thing that State needed to do was keep getting better at the economic issues, not because I wanted them to become the Treasury Department or the USTR or the Commerce Department, but because I wanted them because I knew of all their reach that they have. So I guess my point three is to go to the recommendations in the report and let me just say for the record this is a tough report to write. Greg and Bob have over 50 years of experience in the economic cone within the State Department and there's a lot of criticism in there about the economic cone in the State Department. They deserve a lot of credit for being able to look at the mirror. I think in the end if Secretary Kerry can come forward and do some of the things that Secretary Clinton was trying to do, and by the way past Secretaries have done as well, I thought that what was great about Secretary Clinton was she put such an emphasis and a highlight to it is there's two things that you have to try to deal with to make all these recommendations work and most of them are built around it. One is very difficult and one is very difficult and almost impossible to figure out how to correct. The other is difficult and impossible to figure out how to correct. The first is the point that I think both Greg and Bob have made which is leadership and personalities. I was at NSC when we had personality difficulties between NSC, Treasury, State, USTR, Commerce, and I was also there. I was at Treasury when we had an absolutely great working relationship between all those agencies where, yeah, we had a policy disagreement, but no real bad turf fights and I thought things flowed and worked well and the leadership then of course comes from the top but it comes from the senior management as well. I don't know how you fix that. I mean, it just has an issue of they have to believe in management issues by the way. People in this town are terrible managers and they all think about it's really important, we got to do a good job at it and most of them are terrible at it. It's because they've been great at policy making. How do you do a good job of management and that's not an easy thing and I don't know how to fix that. Then how do you get the leadership and the personalities? The second issue and this is where I guess being an economist is all about incentives. How do you get the incentives correct? And I think there's a number of points in here about having regional assistant secretaries for instance being graded on how they deal with economic issues. I think that's actually a really good idea. It doesn't mean they won't get overwhelmed. The assistant secretary for the Middle East or I'm not sure what it's called anymore, Near East maybe has kind of been dealt a fairly tough hand I would say but by the way economics is going to be part of that solution. I hope that they damn well are thinking about that. Oh I swore. And but getting the incentives right means you probably are going to have to think about the foreign policy institute or is the training correct. I promise you one of the biggest problems that State Department has is look economic cone people sometimes are second class citizens both externally they're not the financial experts that's treasuring. They're not the trade experts that's USTR. They're not the commercial policy experts necessarily although I think that's a little bit different that's commerce department. They're not the agriculture experts they're agro so they're kind of playing second fiddle in all these different areas but that doesn't mean it's not important and then they sometimes play second fiddle internally. Who becomes ambassadors of the State Department? That's a huge goal within the foreign service. The people that come through the regional departments primarily and that is a big problem. Why is it that the minister counselor is a very very serious country in which we have huge huge issues whether it's the EU or Germany, Japan what have you, China is less qualified to be an ambassador than the DCM for some country that nobody in the United States has ever heard of before. That doesn't mean that it's not an important position but that but the way and sometimes it feels like from the outside that the State Department bureaucracy works is that DCM person because they came up through the regional bureau in a very small country should be an ambassador before the person who's minister counselor of a portfolio that no one human being can actually handle and so I think if the State Department can figure out how they can get those incentives right to make it a great career to be in the economic bureau that will help on a lot of things and that's about bureaucratic changes and about some substantive changes and I talked on too long. Thank you for having me. Thanks Clay. First of all I was remiss at the beginning and not recognizing the Shoal Chair and Scott Miller for their contribution to this report and I really appreciate it Scott. Also nice to see a lot of current and former episodes and Econ officers and old friends so I'm delighted to see all of you. We only have about 15 minutes until Under Secretary Novelli is going to join us so I'm going to forego my burning desire to ask you guys a bunch of questions and let the audience ask questions. Let me just say three or four points just really quickly sum up this conversation and the way I look at this. First of all Economic Statecraft is a two sided coin as Secretary Clinton said. It's about using diplomacy to advance U.S. economic interests and it's about on the other hand using economics to inform and improve and advance our foreign policy objectives. To me the first is kind of obvious and important but the second is the one where the money is. I mean that's the one that is really hard and requires a lot of thought and effort and engagement and so I hope that's the focus is how we use economics strategically to support our foreign policy objectives. That's point one. Point two the State Department has a comparative advantage in this area which despite all the challenges and problems and difficulties it has of following and being second fiddle to others and all the internal mechanisms and problems it has reach. We talk about that in the report. State Department uniquely has reach in the sense that it's in every country in the world and it's in it can go across countries across government and across society to deliver messages to pick up intelligence and insight and that's I think what the essence of the answer is finding out how to deploy and use State Department's reach in a better way. At the same time third point is that I think the State Department has to acknowledge that the world has changed and not only because they no longer have a monopoly on communication in the world I think that's obvious but to me the more interesting point is that there's no such thing as a domestic agency anymore. I mean as we say in the report the Department of Health and Human Services is an international agency to fulfill its domestic mandate of protecting the health of Americans it has to be in the international space and the State Department has to figure out how to work with other agencies and accommodate that reality. And the final point I'll make is just to emphasize something Clay said which is all about incentives and I think the answer is how do you incentivize. When I was Treasury at the Shea in Tokyo let me tell you I was heavily incentivized to be a team player with the State Department because my ambassador Walter Mondale at the time would write to Larry Summers and tell him that's doing a terrible job or a great job and believe me that made me play as a team player. So it's all about incentives the reverse you know for State Department people you got to figure out how to get people to do this stuff well and to be rewarded for it and I think that's what it boils down to. Okay I've said more than I need to say let's take questions for the only 10 minutes we have left. Please wait for the microphone identify yourself and please do try to ask a quick question. Thank you it's Dana Marshall with Transnational Strategy Group. Thank you for this. I'm sure that I represent a lot of the econ cone FSOs in this room when I say how much we appreciate what you've done with this. A couple of questions on one comment. One question is this report as important as it is you've written a bit in a vacuum because there is also a need although the President has said he would do it frankly he's not done very much on helping to enhance pardon me the trade promotion function of the US government as we remember a few State of the Union speeches ago there was a big announcement along those lines as far as I can tell very little has happened. So one question is how do you see all that you've written in the context of a reorganization of the trade promotion function across agencies. The second point is although I agree with the recommendations and I've just now looked at them one point that I would quibble about now having been in the government state and a number of other economic agencies for a long time and now running my own business with my own private sector clients is the commercial promotion official of the State Department. I think that person is called the special representative for business. You suggest should not be should be a career FSO having been one myself I don't know if that's really what we need in that role. I think what we really need in that role is somebody that knows how the hell to compete from having run a business really run a business not something that is theoretical I think a lot of the other recommendations are spot on on that one I'd rather see a business person who really knows how to compete in that job. Got it. Thanks. Okay. So just on that second one Greg maybe you and Bob could take a shot at that and then on the first one TPA really important substantive issue if anybody wants to answer quickly about that in sort of State Department organizational terms please do we've got many other opportunities to have discussions about TPA as a substantive matter but with regard to state. On the commercial representative we talked about this at length no ideal solution take your point very very well it's good to have somebody with business background but in practice and we're not naming names but in practice this is usually been a political appointee who does or does not have that background does it often has no government experience and what we were thinking about is the fact that particularly in the economic function in state in EB of which that job is a part you often don't have people who have some experience abroad who understand how foreign policymaking is made we don't have the foreign experts and this person would be a bridge who could do both jobs so that's where we came out on that do you want to add anything to that Greg I think it's important that this job is states interface with the business community here but it's also responsible for providing or managing the provision of commercial services to American businesses approximately 100 or over 100 posts overseas the commercial promotion function that you talked about is actually divided within the United States government overseas between the foreign commercial service and about 55 to 60 embassies overseas or posts overseas and the rest are managed by the state department and so the special representative for business affairs the coordinator for business affairs has two functions and we felt that having that international experience as Bob said is more important than the business experience. Anybody want to talk about TPA? Again we will have and have had many opportunities to talk about TPA and encourage a more robust debate about that. Sean. Hold on one second Sean because the people watching online can't hear you unless you have the microphone. Thank you Matt. I'm Sean Donnelly retired state department economic officer now working to U.S. Council for International Business on reading the report today I commend Bob and Greg for the effort and certainly all the recommendations make sense to me some of them have been around for a while it haven't carried the day but anyway just wanted to ask some people talk of commercial diplomacy some talk of economic state craft could you just clarify is there a difference between the two is economic state craft subsumed commercial diplomacy and include both commercial advocacy and policy I just want to make sure the terminology is straight. I'll let these guys answer but as I said I think to me commercial diplomacy is one side of the coin it's using diplomacy to promote U.S. economic and commercial interests but I think the other side of the coin needs to be talked about and emphasized which is using economics to inform support advance our foreign policy objectives that's the tough part that's why we have George Marshall on the cover it's a little cliched but I mean that's what we're trying to emphasize here is that you know that's what we did in the post war period is we used our economic power to address a serious foreign policy challenge in a creative and effective way and so that's my answer but you guys want to take that on. Just real quickly one was my ex boss so I want to point out there are a lot of exposes and subordinates in here I can see some I see commercial diplomacy as being a subset of the larger economic state craft there's other macroeconomic and development imperative some of which Clay mentioned which are part of the broader economic state craft set. Okay alright anybody who hasn't been an econ is there any in the room? Yes sir. Hi Jonathan sent his senate form relations committee thank you first of all for taking some time to think about this question of economic state craft it's definitely something that we at the committee are interested in and spend a lot of time on as well so I noticed in your recommendations you didn't really address the question of funding directly and so you know thinking broadly in two ways one funding for the state department itself in terms of improving training deploying more economic officers you know adjusting the incentive packages and then also the funding for all the related agencies that you know help us achieve our economic policy objectives so things like Exim you know USTR negotiating trade deals on a relatively thin travel budget and you know even stuff like our contributions to the IMF and the multilateral development banks so just wondering if you have any thoughts on that. First of all you have friends on the appropriations committee because I'm sure you guys would welcome support. Clay do you want to talk about Exim and IMF? Yeah no no look those are great questions obviously I mean you know I helped a little on the report but I just helped provide some thoughts but I mean I think that I think the resource question is an important question which is there's two types of resources right there's their operational research resources or administrative resources and there's programmatic ones and so the Exim bank and IMF and so forth are programmatic ones. It comes in a context of you have declining budgets the 150 account which I think most of these things fall under is not usually considered the most popular account there probably is and but I think the debate on Exim bank is a little bit of money but it's a lot a bit about what is the policy what is are we doing the right thing by doing this and obviously we don't have the time to go into that debate right now the IMF I can't really tell I think it's largely a political debate in which I think most people are like yeah we should probably support the IMF but I want something for it and so so I think it was tough for us to I mean these guys can talk about the report but I think it was tough to get into those type of issues but I think they're very important and if you don't have good programmatic budgets and sound and sound priorities then a lot of this all falls away but to be frank I don't think the administration and by the way this is not for the Obama administration to is necessarily all that great at figuring out what exactly priorities are on these type of issues I view that maybe you might actually want to cut some things out and I don't see anybody ever doing that quickly there's always a lot of browsing about congress and the state department but you know if you look at our report actually we do point out that congressional intervention is sometimes been very beneficial I think the one budget that I think it's hurt us is the off on aspect there's been there was a point in the 90s where our budgets were slashed so deeply that we were cutting a lot we were closing a lot of posts and we suddenly weren't bringing in new foreign service officers and to this day it's like a snake where you have this something this big bulge in the middle you have all these people who are recruited under Colin Powell later on and you know it made it difficult to do our jobs and so I think it's not just the level of the funding but it's I guess to allow a little more flexibility particularly on the personnel side and I think that just to add that this caused us the variability of the budget causes just simply to exclude it and say what can we do about policy and then you know let people interface with congress perhaps in a more coordinated fashion across all of these agencies to work on budgeting not in this context but for sins in a previous life I was involved in the QDDR exercise at the State Department of the Quadrennial Diplomacy and Development Review the first time around when Secretary Clinton launched it and one of the many recommendations that I left behind was that the State Department needs to do a better job of working the Hill they you know compared to the DOD which has you know professional lobbyists on both sides of the house you know working all the relevant committees. State has a couple of people in Foggy Bottom who go up there and you know they're very dedicated people but they're not sitting up there on the Hill really working the system and I think State we didn't put that in here but I think that's another thing State ought to focus on is its congressional relations. Okay I've got good news and bad news about Under Secretary Novelli she's running a little bit late the good news is she's running late because she's meeting with Secretary Kerry talking about economic statecraft so I think we have another she arrived on her way okay so we have a few more minutes and then we'll take a quick coffee break. Other questions yes ma'am Nicole. Hi I'm Nicole Golden I've been leading the youth initiative here at CSIS as part of the project on prosperity and development and really interesting conversation I was formally at State Department in USAID and I'm a development economist and you alluded to it briefly but most of the conversation and from what I could see quickly in the report is about the business and the trade side so I'm just curious if through the study to what extent sort of development economics working with USAID came into whether it's inequality issues, institutional economics, youth employment so on and so forth. Yeah it's a good point we pointed out we didn't cover everything and one of the things we didn't really go into in depth is development and we'd like to focus on that in a future report so good question you guys want to take on development for what I do. Really important subject both Bob and I our experience has been largely in the trade business and finance area and so we and we thought that also aid and state have a very long history of very good relations of working together very closely especially in the field and so we really thought that these were the issues we wanted to focus on. I guess my view on that is I think it is a very important issue I think some of the parts in here get into it a little bit in a different type of way which is that I mean one development economics there is the policy making apparatus within the US government and then there's the operational apparatus so the operational apparatus is largely USAID the Millennium Challenge Corporation, OPIC whereas the policy making is usually being made at state a little bit AID treasury department for the multilateral development institutions and trying to get those to work together actually in some respects can be as hard or more difficult even than done on the macroeconomic finance trade and investment so I actually think you're right and given that if I understand from Matt correctly there's going to be a little bit more done in the future this is probably something that I think does need to be addressed even more so than is in the current report though I think that the recommendations about how state department needs to think about these things internally and having economic parts in even in the regional areas all of that I think will go right towards development because development economics is vital whether it's in South Asia or Africa or Latin America or even Eastern Europe and the former Soviet Union. Okay I think we have time for one more question we'll take a break after that yes sir. Hi I'm Mark Kent with the British Embassy here in Washington I'm also a economic official by training in the UK Foreign Office so some of the themes that you've discussed are very familiar to us as well and we share similar challenges. One of the ones that you've touched on I think only briefly is if there are anything that the state department should be doing less of so in the field of economic state craft we certainly are thinking about how we prioritize metrics we use how we define what should and should not do and I wonder if I've heard some recommendations about what more states should do I wonder if you focus on what it should do less of. Good question very much gentlemen you want to take that on. Well certainly we do far we don't do economic analysis like we used to that so long ago we decided that there's no point trying to compete with Citibank or Treasury for that matter we of course would like to do fewer reports and that gets back to the Congress quite frankly I think we like to spend less time on that Greg do you want to pick up some other ideas? I think it's a great question if you look at the report it's not necessarily about doing more there is a fair amount of recommendations about changing around as I said the incentives and some of the bureaucrates which is really not about doing things more and about doing a little bit deeper training for either existing staff or staff that you start bringing up through the system on the world is changing and you need and by the way it shouldn't I mean we focus a lot on the economic bureau it's not really just the economic bureau you need the regional bureau to have enough economic knowledge to tell me some of these issues and so I think that that's where but your point is well taken because one of the key points of my view on prioritization is figuring out what you can cut and that is always a tricky issue as we know in the government I mean frankly and frankly by the way it's also in the private sector too but it is how do you do a little bit less on a few things because of the several relations of a gentleman's question about resource allocation and so I think it's a great question and maybe we need to think about it a little bit more as we go forward. Well I had a chance to think thank you Clay. I think we should do less on country by country analysis particularly in the field I mean what's the point I think we spend people in the field tend to get totally focused in the post country and think more regionally and multilaterally for example in Europe it doesn't make sense to have four economic officers working on just talking about the Swiss economy or the French economy but rather to think about the EU that would be a clear case. Yeah I mean I have an answer I have a partial answer I think that the state tends to, Clay alluded to this have this role of supporting other agencies and without a lead in most areas and that tends to I think have and I don't want to single out any particular functions but there are a lot of people at state who are going to meetings to kind of keep an eye on and I think we do a lead to that in the report to follow what other agencies are doing whether it's a big team going to OTR or to Treasury or wherever and sort of following that work I think it would be better and you could maybe find some efficiencies if a State Department officer was knowledgeable about a broad range of economic issues with respect to a particular country or region and so could go to a meeting on trade or on finance and with respect to a particular country in Indonesia or something and be completely conversant in all the dimensions of economics and the political and security issues in that country and bring that to any particular interagency discussion of issues that touch on Indonesia that I think would be a good use of states comparative advantage and I think you'd end up having fewer people necessarily just going to a whole bunch of USTR lead meetings or something. So that's one possible area of efficiency I think. Okay, we're going to take a coffee break for like five minutes I hope and then Under Secretary Novelli will be with us and hope you can stay and listen to my interview with her because it'll be that format so thank you for coming to the first hour and thank our panelists please. Thank you.