 Good morning. I'm not going to begin by questioning your judgment about being here listening to me instead of being outside in this gorgeous, gorgeous day, God's green earth. I'm delighted to be back here at the Naval War College, not least because it's a place where adversaries are called adversaries and not strategic partners. What a relief. I was here about 10 years ago to participate in a 10-day highly classified war game, a cyber war game. It was a decade ago. I played the National Security Advisor, and I damn near lost the war. And I was saved near the end by two carrier battle groups in the Pacific who persuaded the adversary to move toward war termination. So happy to be back again. As that says, what I'm going to talk to you about today is perhaps the essence of this book, which is on the screen, that Jennifer Harris and I, my colleague at the Council on Foreign Relations, finished and was published in April. It was a result of three years of work on the subject. And I'm especially happy to talk to you all about it because we heard yesterday the various elements of grand strategy. And Jen Harris and I argue in the book that, as you'll hear, geoeconomics used to be, was for most of our history a crucial part of American grand strategy. And we've forgotten how to do it. And I'll say something about why we've forgotten and then what we should do now. I don't know what you would write if I gave you a three by five note card and said, write what geoeconomics is. I was quite surprised, as we were doing the research for this book, that this phrase, or word, which is so prevalently used, is almost always used without a definition. And we define it. And so I'll begin and my talk will be organized around this definition, which is, geoeconomics is the use of economic instruments for geopolitical purposes. Not for economic purposes, not trade for economic purposes, although those are good if the trade agreements are well negotiated. No, economic instruments for geopolitical purposes. And the center of my argument is that, of course, the United States will continue to need military force to carry out its national purposes, hopefully mostly as a deterrent. But in this era, geoeconomics is more and more the currency, if I can use the double entendre, of international relations. So I've told you what it is that I'll talk about and how I define it. And I'll give you the classical, I'll read the classical definition in the book, the use of economic instruments to promote and defend national interests and to produce beneficial geopolitical results. So that's the front half. And then the back half is the effects of other nations' economic actions on a country's geopolitical objectives. So front half is what we do to them, back half what they do to us using their economic instruments for geopolitical purposes. So now I'd like to address, well, who uses geoeconomics well today and who doesn't? And how do they do it? China, and I know my colleague from the council, this economy is going to be talking about China this afternoon, is often described correctly as the world's leading practitioner of geoeconomics. It is also China, the major regional and global power projection has become such an economic exercise in recent decades. Let me give you some examples, which I think will vivify the definition I've given you. China curtails the import of Japanese autos to signal its disapproval of Japan's security policies. It lets Philippine bananas rot on China's wharfs because Manila opposes Chinese policies in the South China Sea. Sorry, Manila opposes Chinese policies in the South China Sea. It rewards Taiwanese companies that march to Beijing's cadence and punishes those that do not. It promises trade and business with South Korea in exchange for Seoul rejecting a US missile defense system there. It reduces economic benefits to European governments that host the Dalai Lama. It initiates the creation of the BRICS group, conspicuously excluding the United States. It promotes the Chinese-led Asian Infrastructure Investment Bank to rival Washington's based World Bank. In its economic assistance to Africa, it privileges nations that vote with China at the United Nations. It provides more loans to Latin American nations than the World Bank and the IMF combined. Its economic support props up the government of Venezuela, the most anti-American regime in Latin America. The United States has, in our judgment, no coherent policies to deal with these Chinese geoeconomic actions, many of which are aimed directly at America's allies and friends in Asia and beyond. In addition to this rise of Chinese economic power, witness the return of Russian systematic, destabilizing geoeconomic policies in Eurasia and beyond. Russia periodically shuts off energy to Ukraine in the winter to try to bring Kiev back within Moscow's orbit. It intends to shift all natural gas flowing across Ukraine to alternate routes, circumventing the country to deprive Kiev of crucial transit payments. It threatens to reduce energy supplies to the European Union if Europe joins the United States in responding to Russia's aggressive external behavior. It promises massive economic assistance to the annexed Crimea. It entices former EU leaders with lucrative contracts with Russian companies. It establishes the Eurasian Economic Union to tie countries in former Soviet space closer to Russia's geopolitical preferences. After Warsaw's strong reaction to Russian intervention in Ukraine, Moscow suspends imports of Polish cheese. It bans the import of Georgian wine because Tbilisi's determination to protect Georgia's territorial integrity. It offers financial aid to Greece when EU leaders are attempting their own bailout package. It dangles the prospect of an economic bailout before Cyprus in return for military port and airfield access, forcing EU leaders to choose between crafting a sufficiently attractive bailout program of their own or living with a Russian military presence within the European Union. It bribes the weaker cash strapped members of the EU in hoping to provoke defection from US-EU sanctions against Russia. So for all the readiness, drills, and military commitments being undertaken by NATO leaders in response to Russian aggressive behavior, all of which I support, the United States has no consistent policies to deal with these Russian geoeconomic moves. Another example, the donor states of the Arab worlds, especially their economic power, how us the Gulf Cooperation Council, are equally uninhibited in their use of geoeconomic instruments. The Gulf states pledged $12 billion in 2015 as aid to Egypt, adding to the more than $20 billion already contributed since the military ouster of former President Morsi. Oman commits $500 million in aid and investment to Egypt. Riyadh provides economic support to Iraq's Sunni tribes fighting ISIS. Saudi Arabia and the UAE together supply Jordan with more than $2 billion in annual aid, leveraging Oman to contain and dismantle the Muslim Brotherhood. With sums like these, the Gulf states have essentially set off a new great geoeconomic game in the region. And once again, the United States appears to have no policies to respond. So it is with many countries, the theater of foreign policy engagement has been for some time markets, not tanks, not submarines, markets. Many states today are as likely or more likely to air disagreements with foreign policies through restrictions on trade in critical minerals or through the buying and selling of debt, much more so than through military activities. As one astute early observer of this phenomenon, Les Gelbe, again another colleague at the council, put it, quote, most nations beat their foreign policy drums to largely economic rhythms, unquote. So why has the United States lost the capacity to react and initiate geoeconomically? In the current era and across the political spectrum on both sides of the aisle, the United States instinctively today debates the application of military instruments to address many of our complex challenges. There's no comparable discussion in Washington of returning Ukraine to economic viability as a way to check Vladimir Putin's designs for the new Russia. No coherent US policy of prioritizing economic and financial denial strategies in the fight against ISIS. Just to give you one example in that regard, if you catalog congressional hearings on the major issues that face the United States today, those hearings are overwhelmingly dominated by political military issues. So we have a hearing as to what is the correct number of American special operators in Syria? Is it 150, 200, 250, 400? And we have no serious congressional consideration of China's coercion of its neighbors at their and America's expense throughout Asia. So again, no coherent policy to build a Middle East coalition to blunt the economic transmission lines Iran relies on to project influence into the region. No now-today coherent patient effort to bolster the faltering Afghan economy, on which of course defeating the Taliban, importantly, arrests. And finally, no effort to integrate into the Trans-Pacific Partnership Agreement, the TPP. Now before the Congress, no effort to integrate into that agreement a effort to address Chinese coercive geoeconomic behavior in Asia that the TPP is solely a trade agreement. Thomas Jefferson would have regarded all of this as exceedingly odd. He did not send the newly minted American army to conquer French territory between the Mississippi River and the Rocky Mountains. Rather, in an exquisite geoeconomic enterprise, he bought it to help prevent London from supporting the confederacy to the Lincoln administration threatened Britain with the loss of billions of dollars invested in US securities. Government support for overseas private investment drove both American engagement with Latin America and the rebuilding of Europe in the 1920s. The Roosevelt administration in the 1930s deployed trade to preempt German economic encroachment in the Western Hemisphere, and it attempted to use the export import bank to blunt the rise of Japan. A year and a half after the outbreak of World War II in Europe, the Len Lee's policy of 1941 enabled the United States to supply allied nations with defense materials needed to win that war. In 1944, delegates from the allied countries, led by the United States, signed the Bretton Woods Agreement, which was explicit in its geoeconomic hope that strengthened international economic cooperation built on US and British terms could help to avoid the horrors of another global war. Secretary of State George Marshall in June 1947 delivering commencement remarks at Harvard University famously declared an archetypal geoeconomic proposition. Quote, the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace. By the Johnson and Nixon years, however, geoeconomics had noticeably begun to wane. The war in Vietnam pushed geoeconomics off the US policy stage. It was perhaps inevitable that the outbreak of armed conflict and hundreds of thousands of US troops on the ground in Southeast Asia would shift policy makers' attention in the direction of the military use of force. But this continued through the 1979 81 Iranian hostage crisis and the failed rescue attempt. It gained momentum with Washington's military responses to the Soviet invasion of Afghanistan, the US military interventions in Angola, Lebanon, Grenada, and Panama, the First Gulf War, the Clinton administration's air campaign in the Balkans, 9-11, and the wars in Afghanistan in Iraq, the US-led NATO intervention in Libya, the American drone and combat air attacks against the Greater Middle East, across the Greater Middle East, and the introduction of US ground forces back into Iraq and deployment of special operators into Syria. Even when policy makers' attention turned from waging conflict to deescalating it, the parameters of discussion stayed largely confined to conventional political-military concerns. Arms control negotiations, they taught with the Soviet Union, diplomatic openings with Soviet allies, all assisted by largely political and diplomatic factors. And even in the rare cases when the United States did take on a geo-economic project of some magnitude during this period, for example, attempts to bring Russia and China into the Western economic order, these tended to remain geo-economic, that is to say, for geopolitical objectives, only briefly before morphing into more straightforward commercial and purely economic ones. So geopolitical factors have not disappeared, but they have become secondary, if not tertiary, considerations. The decline in American foreign policymaking in recent decades on geo-economic factors is complicated. Lots of variables, subplots, nuances. But the short version is a combination of neglect and resistance within the US government. American economists tend to resist putting economic policies to work for geopolitical purposes, in part because the notion of subjugating economics in this way challenges some of economists' deepest disciplinary assumptions. My friend, our friend Mike Mandelbaum, puts it like this. The heart of politics is power. The aim of economics is wealth. Power is inherently limited. The quest for power is therefore competitive. It's a zero-sum game. Wealth, by contrast, is limitless, which makes economies a power-sum game. And economists resist the notion that economics should be used as a function of state power. So they see the world through this positive sum logic and have little appreciation for the realities of power competition among nations and opposed using economic policies to strengthen America's power projection. This notion has also, however, encountered ambivalence from foreign policy strategies, although they are steeped in traditional geopolitics and are not adverse to viewing economic instruments of statecraft within a zero-sum logic. Some strategists fail to recognize the power and potential of economics and finance as issues of national purpose, thus embraced by neither economists nor most foreign policy strategists the use of economic and financial instruments as tools of statecraft has become an orphaned subject. For a time, that seemed of no great consequence. In the years following the Cold War, the United States faced no serious geopolitical rival, no real struggle for international influence or in the contest of ideas, liberal economic consensus, pervaded. And as it did, what began as a set of liberal economic prescriptions aimed at limiting the rightful role of government in the market more over time into a doctrinal unwillingness to accept economics as subject to geopolitical choices and influence. Thus, certain liberal economic policy prescriptions, such as trade liberalization, that found favor initially as partly because of their geoeconomic and geopolitical advantages, these objectives changed over time to justify these policies on the internal logic only of laissez-faire liberalism and not on geopolitical grounds. So what to do about this? I now conclude with prescriptions, policy prescriptions, for your consideration of what to do now about this. And I'll do them very epigrammatically in the book. They are all discussed at length. So first and foremost, nothing would better promote America's geoeconomic agenda and strategic future than robust economic growth in the United States. Now that, of course, is banal. It's a truism. But I think we all know what that means, at least in part. And it would require over the next decade a solution to our entitlements, enormous overhang of current and future debt, and public and private investment in our infrastructure. And so far, of course, we've failed on both grounds. In addition, second, the next president should speak to geoeconomic policy by laying out an affirmative vision of the role of economics in our foreign policy. Again, this will be terra incognito to most Americans. And I think most politicians, too. But it would require presidential leadership to explain it, both its importance and its substance. Without going into detail, we have structures. I've worked four times the White House. Just shows how, by the way, short memory is in Washington that I kept getting invited back time after time. We have other examples of that shortness of memory that have come to mind. But in any case, our bureaucratic structures are not now organized to deal with geoeconomics as an instrument of American foreign policy. That would need to change. The US Congress put bluntly, the US Congress is often a serious impediment to implementing a coherent and comprehensive American geoeconomic strategy. And among other things that the new president should do with the new Congress to try to reduce this current poison relationship between the executive and congressional branches is to deal with this subject. And I would very much like to see, for example, the Congress, when it comes back into session at the end of January, to schedule a series of hearings on geoeconomics and let those who are skeptical of the arguments that Jen Harris and I make in the book, fine, but let's at least address the subject, which currently is not the case. Next, Bob Gates, when he was sect deaf, urged that money be shifted from the Pentagon to be used by the State Department to advance US national interest through geoeconomic means. Just to give you some sense of this, the State Department budget request for fiscal year 2016 was $50 billion, and the Defense Department's request was $585 billion. Such a ratio is incompatible with an era of geoeconomic power projection. Both numbers should be substantially raised. The United States will need to develop a more coherent, concerted understanding across the US government with respect to geoeconomic possibilities for the United States. I'm struck by, I don't know, how many hundred meetings more that I've been a spirit carrier and then a participant later in White House situation room discussions about crises and long-term challenges to the United States and its national interest. And I've always been struck by, especially since I started this project, that usually there's not a senior member of the Treasury Department at those meetings, which is not a senior member of our trade folks at those meetings. They're usually represented, if the meeting's big enough, by somebody who sits against the back wall and says nothing. And I think this is indicative of the interagency process that needs to change. We need to reboot our alliances for geoeconomic action. Of course, we're not going to turn NATO and the US, Japan, South Korea, Australia security alliances and shouldn't into only geoeconomic instruments, but they should, geoeconomics should certainly be a part of their arsenal to deal with our adversaries. We need to ratify the Trans-Pacific Partnership agreement, which, as you know, is in heavy sledding now at in the Congress. This was not negotiated as a geoeconomic agreement, to my regret, but now it has geopolitical purposes and influence. And if we fail to ratify that agreement in many of you spend time in Asia, it will be a very serious blow to American credibility, including on the security side across Asia. So that needs to be ratified as does the counterpart agreement with the Europeans, the so-called TTIP. We need to develop a geoeconomic policy to deal with China over the long term, and now we have no such policy. This is not to argue we shouldn't be deploying more often in the South China Sea, which I strongly support, but it's as if we only play with a playbook of six plays and the Chinese have a playbook of 35 plays. And we give much of the playing ground to their economic coercion with no American response. We should make geoeconomic investments in India as a rising Pacific power. And we could do, I won't get into the details here, but we could do a great deal more. And incidentally, the book discusses at length how the current Indian Prime Minister Modi, Narendra Modi, has used geoeconomic power projection since he came into office into Southeast Asia and the Indian Ocean precisely to meet Chinese geoeconomic penetration of that area for 15 years. We need a geoeconomic policy to deal with Russia over the long term if the objective of sanctions was to coerce Russia into withdrawing from Crimea and stopping its intervention into the Donbass into Eastern Ukraine, that policy has failed. Has failed. What other economic instruments might be available if we decide that's a priority for the United States? The energy revolution, there is a chapter in the book about the energy revolution and how it could be put to geoeconomic uses by the United States. Climate change, again, in my judgment, a strategic challenge for the United States with many security dimensions. And we don't have climate change on our agenda as having these strategic dimensions. Cyber attacks, this is stunning to me. Imagine that you're the PLA general running the cyber assault on American private enterprise. Imagine you're doing that. Imagine you've been doing that in increasing intensity for 15 years. What is the sum total of the US practical response to that? It is to indict five rather junior PLA officers. That will shake them in China. And again, we are passive in the face of this massive theft of American intellectual property. How do we deal with it? We whine about it in periodic meetings with the Chinese and not more. The Middle East are aid packages to countries like Jordan are pitifully small if you believe Jordan is one of the keys to stability in the Middle East. And I could go on. The same is true. We are non-competitive in Latin America and Africa in places that matter with respect to our aid. And then finally, if I may say, being here, at least we support increased university teaching on the subject of geo-economics, including for folks who come here as students. Since we think that this geo-economic dimension of American foreign policy will be used against us if we don't come to be more effective in dealing with it. So finally, either the United States will begin to use its enormous economic power for geopolitical purposes with greater resolve and skill or its national interests will be increasingly in jeopardy. U.S. domestic economic strength in the decades ahead must have more relevance to U.S. national interests and the consequent identification of international threats and opportunities than by simply funding a huge defense budget useful as that is to U.S. global purposes. To recall Mao who was discussed yesterday, international power and influence need to flourish and to shape the balance of power in America's favor. That comes not only from the barrel of a gun but from the strength and application of the U.S. economy for America's strategic purposes. Whether administrations and the Congress will understand, digest and implement this compelling reality with focus, clarity and a sense of geo-economic purpose remains a preeminent issue of American grand strategy in our era. Thank you. I look forward to your comments and questions. Hello, sir. I'm Lieutenant Commander Ed McClellan. Good morning. United States Navy. Thanks very much for asking a lot of questions. Good for you. So one of the preeminent themes of our courses here has been the importance. Can you speak up a little for me? Yes, sir. One of the primary themes of our courses this year has been focused on the importance of coalitions and allies. You spoke a little bit about possibly incorporating the EU and others into some sort of coercive economic instrument. So as I look at the examples you gave of Chinese and Russian coercive use of economics, it seems difficult to identify allies that they've gained in using this instrument. Could you talk a little bit about how we would maintain alliances by using coercive economics? Let me stress that geoeconomics is, importantly, an instrument of coercion. But it's also probably even more so, including used by the Chinese in particular, a instrument of incentives. So the Chinese go across Southeast Asia and offer interest-free loans or grants to build the infrastructure in the nations of Southeast Asia. So it's both. Now, with respect to our allies, it's true China doesn't gain allies through its geoeconomic policies. But it certainly influences its neighbors and beyond by these policies. If you do, as we do in the book, a look at Africa's votes at the United Nations, they're closely associated with China's geoeconomic policies across the continent. The more money that China puts into an African country, the more likely it is to vote with China at the United Nations. And there's a one-to-one correlation. Incidentally, I think the number is now. China has built 35 very large soccer stadiums across Africa, oddly enough, usually in the home province of the president of the country. Oddly enough, so it's not gaining allies, but it is influencing government decisions. As was mentioned, I did my last book. Not this one, the one before this was on Lee Kuan Yew. And Lee Kuan Yew used to put it like this. China tells us, Singapore, that all nations are equal. But then when we do something that China doesn't like, they say, know your place. And have you noticed the size of the Chinese market? These influence countries, now, final complexity, which is, to our favor, Chinese geoeconomic policies in Southeast Asia, in particular, have been burdened by their behavior in the South China Sea. And countries that were much more susceptible to Chinese geoeconomic coercion are less so today because of this aggressive Chinese behavior in the South China Sea. There are undoubtedly, folks, Liz's economy would know much better than I. And you get a chance to hear her this afternoon. But I'm sure there are many critics, at least critics, in the Chinese government that worry about this. As Lee Kuan Yew said shortly before he died to me, he said, it's bewildering to me because the Chinese have spent two decades in trying to persuade us that they are a peaceful partner in Southeast Asia and having lots of success across Southeast Asia. And then they have squandered that through their behavior in the South China Sea. And we have long memories. So this is not magic. America, both using geoeconomics as incentives and as coercion, is not magic. It won't produce a magical positive result every time. It can be mismanaged, like every other element of American foreign policy. But we ought to start using it coherently and consistently in our external policies. Good morning, Mr. Ambassador. Good morning. My name is Kevin Jordan, a former graduate of the War College 20 years ago. My question this morning has to do with the pending UK vote to stay or exit the European Union next week. What are the implications of that vote for US geoeconomic power? Well, it's important. I don't want to exaggerate this because when you're in a debate as heated as the one that's happening in Britain, then both sides exaggerate. That's just part of politics. And they reach for the bumper sticker. All will be good if we do X. All will be terrible if we do X. Nevertheless, I worry in geoeconomic terms and pure geopolitical terms. Let me just do, given your question, the geoeconomic. The geoeconomic implications of this. If they leave, then this puts Germany even more at the very center of the future of Europe on the economic side, which then manifests itself on the geopolitical side. And as we know, many European countries are already uncomfortable with the degree of German influence within the Union. And that will grow. And the second point I'd make is that Britain, for us, is our most reliable and persuasive friend inside the Union and has been since it entered. And so again, having Britain on the outside, not a part of the EU deliberations, I think is not in America's interest. The first point, I think it's not in Europe's interest. And the second, it's not in America's interest. I don't want to, finally, I don't want to exaggerate the geopolitical power of the European Union. I've often thought that the Eurocrats, the European bureaucrats in Brussels, they have at the outside of the facility in Brussels what is like a metal detector, except it's a strategy detector. And anybody who tries to go through the doors with any strategic orientation is turned away, bell goes off. And if they try again, they get a mild shock. And then it grows. But having said, and by the way, their handling of Ukraine before the Revolution is a perfect example of an economic, non-geopolitical offer to Ukraine which hastened the Revolution so inadvertently. So I think the United States, Europe in the first point, has big stakes in that vote, which I guess is next Thursday. And we have big stakes. But just domestic politics is not my line of work. But it does seem that the opposition has some similarities with populist trends through all the democracies, including our own. But I, one, as a strategist, think there are considerable stakes here. And I'm worried about the latest polls, which show that those for departure are growing in strength. Morning, Mr. Ambassador. Commander Tom Remers, US Coast Guard. Since you've really already addressed Russia and what those sanctions really failed to have any sort of strategic effect, I'll limit my question to Syria. How would you categorize the treasuries, targeted sanctions, asset seizures, travel bans, and some of those actions that were taken, including petroleum bans that were not only by the US, but also the EU? If those are not geo-economic, I'm curious how you would categorize those. Then as a follow-up, given that I think you could argue those have had very little strategic effect as well, but have really almost created black markets and volatility in currencies that have allowed senior government leaders and business elites to actually profit from a lot of those actions, what alternatives would you propose specifically and limited to Syria? And when might those types of actions be appropriate? Thanks. Well, Syria, there are a variety of dimensions to this. So let me just go through them one at a time. I am gratified that the administration, after very slow, they taxied around the runway for a couple of years before they took off. But now, they're working very hard at constraining the revenue that is available to ISIS. And they're having some success in that regard. And we learned a lot in the Iranian case about how to do that successfully. And let me say, a geo-economic success of the administration, I think really their only one, but it's not trivial, was sanctions which drove Iran to the negotiating table. So good for them on that. I won't now address the quality of the negotiation on the American side after they got there. But in any case, that was you. Now back to Syria. So first is that. Second, there's a debate of which I've been a part. And it'd be interesting to see what you think about it on another setting with a case of coupers or more. But is the current refugee crisis such a geopolitical challenge to Europe that it's going to alter the very character of European society? It's not debated. A million last year, another million this year. But if you think that's possible, of course, then you would have intervened in a much bigger way with economic assistance to try to slow that mass migration. So that's a second. But and now I'll be more generic in character. The instrument that we shrink from, which incidentally would be the most successful instrument of geoeconomic power is banking and currency. The United States, with many of the countries that cause us difficulty, could destroy their banking system in 48 hours and destroy the viability of their currency. We shrink from that because we worry about the effect on the international system, the reliability. And of course, it's not an instrument we should be using often. But for 15 years, the Chinese undervalued the value of their currency and used the profits that generated to build up their military, sort of a classic geoeconomic thing. So one does wonder if you really did wish to remove the current leader of Syria, we could make it very hard on Syria to conduct any economic business inside its borders if we were to take that decision. Now, I myself would not support that for other reasons. But it is an example that, and I think I'm about to get the hook here, but it is an example, so I'll generalize like this, that we don't even think of these things except for sanctions. We're the champion of sanctions. And some of you haven't been paying attention sufficiently, so I'm thinking of sanctioning you this morning. Just we sanction countries. I think we have 25 or so different countries we're sanctioning now. We basically have sanctioned everybody on God's green earth one time or another. So we do that. But we don't use any of the other many instruments of geoeconomics. Well, are we out of time? We're out of time. So thank you very much for your attention. Thank you.