foreign relations. >> welcome, i am matthew goodman , the director of the greenberg center geoeconomics studies and as of two minutes ago, the director of an initiative we are rolling out. we are launching this new initiative on reimagining leadership, this was the brainchild of mike roman said he

wanted to emphasize a number of cost-cutting and this is the first we are rolling out. make will have a chance to explain this in his own words, but i think we would agree there were two fundamental premises. it matters for americans and advancing u.s. interests, but second ramos is a lot of things have changed in the world after world war ii, and american economic leadership is going to look different over the years and decades ahead. i think of really, as a platform

about what the challenges are what approaches would best serve u.s. interests. you hear more about the background in the short video. but let me just highlight three things we're going to be doing. we're doing a listening tour, if we are going to move forward my colleague and i traveled were

going to wisconsin we're also planning and outside views hope to get some canadian tough love and the second thing you can see all this on our new website. life is full of trade-offs.

third, we are deepening and expanding on three key policy areas. trade and investment, development, economic security that basically deals with high-technology leakage. let me explain the run of show. we will play a short introduction three video before introducing our keynote speaker, we will have a brief conversation and we will

hopefully have time, and then mike will be joined on stage who will moderate a discussion and again you will take questions from the online we will end at 11:15 and for those in person who stay afterwards there will be coffee outside in the foyer. a personal note let me end by saying i feel i was kind of put on this earth to work on this project. it is a complicated point that those of you who know me understand why i said it and i am grateful to mike for giving me the opportunity and to my colleagues for their help. as you will hear mike say in the video, this is a huge

undertaking that will not be done quickly, it is a multiyear, multidimensional project and we cannot do it alone. 19 cannot do it alone. we will need partners like all of you in the room and online so we very much want you to provide input and now i will give you the email address you can write to to give us input. realecon@cfr.org. with that i look forward to working with you on this exciting project and please roll the videotape. >> years ago emerging from the devastation of the great depression and world war ii, the u.s. led the creation of a new international economic order. europe and japan were rebuilt. the global economy was remade

with the intense of securing peace and prosperity. billions were lifted out of poverty. innovation flourished worldwide. in the past few decades seat -- the seams of the system have been beginning to fray. at home we see the disruption of industries and the impact it has on select communities. rising income equality and weakening confidence in the promise of the american dream. we heard a growing skepticism about the theory and practice of global trade and investment. >> not a good week for the wto, accused by critics of corporate greed. >> worries about economic security have risen to the top of the agenda. there is a new rivalry between china and the united states. around the world, new challenges from the specter of pandemics to the relentless march of climate change, all of which threaten to

reverse the progress we have made. many policies and institutions established 80 years ago seem in desperate need of reform. what we need is a rigorous look at the strength and limitation of the system, a fact-based analysis of current challenges and generation of new approaches for the path ahead and we need to ensure the issues are addressed not just in the conference rooms in washington or new york, but in collaboration with people representing a broad range of perspectives from across the country and around the world because no u.s. international economic policy can be sustained without the strong enduring the support of the american people. today the council on foreign relations is watching -- is launching realecon. we begin by focusing on the following issues. trade and investment. how do we benefit from economic integration while ensuring the

benefits are probably unfairly shared? development. how do we ensure we make continuous progress on alleviating poverty, improving human development opportunities and addressing emerging challenges like climate change? economic security. how to protect national security and per -- position in the u.s. to compete with china and deal with other risks including the pursuit of industrial policy? in all of these areas, we will ask why it matters, what is at stake for americans, and one of the trade-offs involved in pursuing alternative options? reimagining american economic leadership for the next 80 years is no easy or quick task and it will require ongoing engagement with an contribution from a wide range of partners. we hope you will join us on this journey. ♪ [applause]

mike: what a good-looking guy that was. thank you for being here. we have a full room here in washington and about 350 people online. thank you, matt, matt has been the driving force behind the initiative since joining the council six months ago or so. i worked with him for years at the nsc and we are very lucky to have him here at cfr. the video laid out much of what the initiative is about and i thought i would take a couple of minutes this morning to give broader rationale behind the initiative before introducing our keynote speaker. we are collectively witnessing a remarkable period in world history. 80 years ago the u.s. led an effort to create an international system built on democracy, liberalism and market-based economics accompanied by the advent of technology that spurred on global innovation.

now all elements are being questioned. democracy at risk. liberalism is under siege with the rise of authoritarianism. globalization is subject to scrutiny and criticism. this reflects a challenge to u.s. leadership or at least how the leadership has been exercised in the last 80 years. today we are talking about economic will leadership, reimagining american economic leadership but there is an assumption that american leadership matters to the world and to americans and we should pressure test that assumption. some argue the u.s. does not need to lead or engage. they argue doing so runs the risk of embroiling us in other countries problems and at the expense of the interest of americans. it is not a new argument. isolationism traces back to the founding of the republic. george washington's farewell address and warning about entangling alliances. he was during world war i and

world war ii and raised again after the second world war. it is perhaps the driving force behind the creation of the council of foreign relations 103 years ago and yet time and again it has become clear to the american public that despite being protected by the oceans, the interest of the u.s. cannot be separated from the rest of the world. it has never been more true than today. take trade. support for trade today is robust and bipartisan. 74% of americans say is good for the economy. 80% say it is good for every day consumers and the standard of living. 63% say trade is good for creating u.s. jobs, up from 38% 20 years ago. but you would not know that from the politics of trade. what they demonstrate is that

whatever the broad economic merits of trade are, reality and perception of the acute cost, dislocation and wage competition are much more politically salient. trade and is just one pillar of this initiative. development and economic security are the others. we have very interesting and difficult questions ahead of us. how do we harvest the benefits of trade and investment will ensure the benefits are probably unfairly distributed? how do we address the distributional consequences of trade and investment and ensure society has the tools necessary to thrive in a rapidly changing economy, whether the changes driven by trade or technology? how do we most effectively address the challenges faced by developing countries which left unaddressed will most certainly become challenges for developed countries, whether it be through climate change, forced migration, or other challenges?

how do we deal with the challenge of competing economically, politically, with china and ensure we retain the necessary dynamism and innovation to succeed in that competition? what role should the state play in that effort in terms of promoting industries, restricting exports, screening investments? the potential answers to the question all post trade-offs. ambassador lighthizer published a book last year called no trade is free. i think a better title might have been no trade policy is very. we dislike being so dependent on china for so many products but also hate the high cost of living and inflation. both are politically unpopular. but the actions taken to reduce dependency on china will likely raise prices on goods. there is a trade-off to be made.

arguments can be made on both sides but we should not pretend one approach or the other is free. there is a convergence, we see the convergence of national security and economics and it is clear efficiency, low cost production on competition is not the only value to be sought from the organization of supply chains. there is redundancy, resilience, security. they are all objective -- legitimate laudable objectives to pursue but all come at a cost. there are trade-offs to be made and we should have that discussion and help policymakers on the public way the costs and benefits of the various approaches. to be successful, the initiative needs input from a diverse range of voices from around the country and different political and economic perspectives and it is important to ground the discussion in a fact-based analysis, not polemics.

debate and disagreement, not partisanship and nuance. these will all be virtual's -- virtues as we reimagine american economic leadership for the rest of the century and that brings us to our program today. we are delighted to have jared bernstein. you are all familiar with his background. a fellow at multiple think tanks. an accomplished jazz musician and double bassist. i have had the privilege of knowing and working with jared for many years and i think it is fair to say we have not always agreed. when i published an article on the progressive case for trade, he felt the need to publish a rebuttal. and that is a good thing, although i am not sure i felt that way at the time. while disagree, he has never been disagreeable. i was grateful when he made the

following notation in his article. full disclosure, i have worked with mike over the years and know him to be an honest, knowledgeable person. [laughter] thank you, jared. to be successful, the initiative will require honest and knowledgeable dialogue and those are sentiments very much behind realecon, to encourage open, frank, constructive dialogue. the challenge we face now demands no less and with that i would like to invite jerry to the podium for some opening remarks. -- jared to the podium for some opening remarks. [applause] jared bernstein: thank you. i do not remember that back and forth. i have to go back and read it. i first of all would like to associate myself with mike's

introductory comments. i thought they were spot on and it sounds like realecon is exactly what we need right now. so i personally would have called it inflation-adjusted econ, but i like where you landed. again, thank you to see you to the cfr for inviting me to speak. i would like to share a few thoughts about how we and the biden administration think about international economic leadership. the cfr has done some of the most thoughtful work in this space. i think one of the most valuable and consistent attributes of your work as i read it, and i have done so for decades, is no matter how deep you go into the policy reads, questions around international leadership pervade the work so i am pleased to be in your company at this sensitive time in political economics when different approaches to leadership are on offer.

a leadership agenda stems from the values of the present. it has been my privilege to work on economic policy with president biden for many years and his values are shaped by the view that help -- that after helping to bake the economic pie, you deserve to have a fair slice. that carries through to our international work as well. to be clear, building a strong inclusive economy that grows from the middle out and bottom up cannot occur in a global vacuum. the president's project to reestablish the u.s. is global partner to our many friends in pursuit of our joint goals began day one and is ongoing. when it comes to international trade, we have been explicit about ways in which our trade policy differs from those of previous administrations, a point i will unpack in a moment,

but any idea that we favor -- are unfounded. domestically it elevates the importance of worker empowerment and bargaining power which in policy terms translates into full employment as a central macroeconomic role supporting unions and ensuring workers from all walks of life will have the opportunity to achieve their economic potential. in one of his first economic speeches, the president stressed the importance of getting the job market back to full employment, mentioning the phrase five times in an early speech. my guess is you have to go back decades to find another president with that much and fittest, one that is so fundamental to inclusive growth agenda and anyone who tracks the numbers knows it is not just

rhetoric, not only has the unemployment rate been below 4% for over two years amidst historically strong job creation, but we have seen inflation come down two thirds from the peak over the same period. our work on lower prices is far from done. we have a cost-cutting agenda i am happy to discuss. prominent economist assured us we could achieve this much disinflation without giving up numerous points of unemployment and growth but worker policy implies we do not lower inflation on the backs of working people, instead we help build out the economy supply-side. it is a joint project with the private sector. ca analysis of the last nearly two years of disinflation found supply-side improvements, supply chain, labor supply, was the

crucial ingredient to bringing down price pressures by maintaining above trend growth and full employment labor markets. another key ingredient meant, the president does not just talk the talk on unions, he walks the walk and he does so on the picket line. of interest to this audience is how we map our agenda up to international trade. americans are not just consumers, they are also workers and our communities are centered around and identify with productive work. in this regard communities get hollowed out due to competition with low-wage low-price exporters is a huge body blow to our politics. and the old economist adage, don't worry, people can just relocate to places with more economic activity, is now being seen as the insult it is.

that is one reason for our intention to make sure the domestic industries we help stand up are geographically dispersed. archery deals and trade framework should embody worker centers values and promote international labor rights. consider the usmca rapid response labor mechanism. since 2021 the u.s. has invoked to the mechanism 18 times at different work bases. as a result the u.s. has achieved improved outcomes for thousands of mexican workers, millions have been paid to them, more workers are represented by independent unions, there have been more free and fair union elections and unions have successfully negotiated for higher wages and improved font -- improve policies at facilities. they are key areas where we must work with international friends to achieve more resilient supply chains and mount a joint force attack on climate change.

the pandemic taught anyone who was paying attention of the need to achieve far better supply chain resilience, a goal that requires domestic investment and global cooperation. given the risk posed by china of the ongoing reallocation of trade away from china more toward mexico and vietnam has been welcome but we must be mindful of china's increased production in those countries. the fight against climate change is an important area of global competition and our administration has frameworks to promote climate goals between the u.s. and partner countries. the minerals in agreement with japan enables the countries to strengthen critical mineral supply chains using best practices in labor and environmental standards. the australia united states

compact is designed to coordinate on several issues vital to clean energy and critical mineral supply chains. and the partnership with 13 countries targets financial and diplomatic support for projects along the mineral supply chain. in closing these comments, let me stress one last area where global economic leadership is so important to the president and the nation. whether or not we face the task of defending democracy against the growing threat of authoritarianism. while the threat engendered by the conflict has long played out often in violent ways, let me say a few words about why present -- preserving democratic rights and values and institutions is so important to just and fair economic outcomes. there is a compelling literature documenting the negative relationship between rising threats to civil liberties, rule

of law, fair elections, peaceful transfer of power and on the other hand, economic outcome. democracies tend to have political institutions that credibly commit to access promise that enables stronger enforcement of basic ownership rights that in no -- that enhance innovation and risk-taking. because of the checks and balances on the government's ability our institutions are growth enhancing because they make it safer to invest. another important risk -- institution at risk is an independent central bank. history is replete with examples of economies brought to their needs because the independence of the central bank was violated without regard for longer-term damages. democratic governance yields progrowth social outcomes. under authoritarian regimes democracies are more likely to invest in human capital with

positive long-term effects of accountability. policies improve broad placed growth outcomes. with that brief overview of what economic leadership means to our administration, i look forward to our discussion. thank you. [applause] >> thank you, jared. i really appreciate you coming here, notwithstanding -- notwithstanding our disagreements in the past. let me start with the macro

picture. the last couple of years have been remarkable. inflation came down by two thirds. unemployment down under 4% your job growth was strong. it is the phillips curve dead? did economist get it wrong? is there something else going on in the economy that has not generally been accounted for? how do you explain? >> this could take up all of our time but i will try to be brief because this is something macroeconomists think about all the time these days. i think pandemic and post-pandemic economics are unique. global pandemic. i would not say the phillips curve is dead, i would say the simple linear phillips curve is

comatose and the nonlinear phillips curve, meaning what happens in the relationship between unemployment or economic activity inflation looks pretty different when economies are bumping up against the full capacity. what happens -- what happened in the pandemic was you have strong demand both because people had boosted their savings considerably from not interacting within person services, going on vacations, restaurants, that along with fiscal and monetary support colliding head-on with global supply constraints when consumer preferences were shifting directly to that part of the supply chain boast constrained. it led to a non-linearity in the phillips curve, which is bad and good.

as inflation goes up very quickly, the good part is you can slide down the curve with out giving up much in terms of demand destruction and that is what we have seen. one reason why people say the last mile is the hardest is because you are moving from the vertical part of the curve where the sacrifice ratio is very low to the flatter part where it is higher. that is something i think people reasonably put forth. >> that suggest it really was a temporary set of events. >> you could even say transitory. >> not a significant change in productivity being captured by normal economic theory. >> if anything, productivity seems to have accelerated but i need to see years of that before i believe it. >> let's talk about industrial

policy. it is one of the areas by the administration. state intervention in the economy has had a mixed reaction. chips act, ira, financial security based on market failures, export controls in foreign investments, what and so far the chips act in particular, early days, generally successful at least as of now. how do you think about, what are the parameters of industrial policy going forward if we can focus on a few specific sectors now are there likely to be more or where does one draw the line between what should be the promise? >> i think the most important

couple of words in your question is market failures. there are areas where markets have failed to sufficiently invest. obviously clean energy is the default i think most people would recognize. but as you stated in your comments, non-resilient supply chains represent another. and the fact that we used to produce 40% of the world's chips and now we are down to 10% in an area that looks of crucial importance for national and economic security is a motivator for chips and geopolitical conflict that both of us alluded to particularly with china in the international trade space also suggests two reasons for an international policy that i think looks more like our own. so the question is, i was at the economic policy institute for years, probably writing the

articles that you had room for improvement. [laughter] seeing more market failures than other people around more corners, i think it is part of your question and the answer to your question or another way of reframing your question is do you think your administration is going to see more market failures than you have seen thus far? i do not know the answer but it is not obvious to me and i think the places we have hit are the most obvious ones that kind of jumped out at you if you have our framework which i tried to describe so i would not think they would necessarily be a bunch of expansions but i think another dimension of the question is to what extent does this have to be ongoing?

to what extent does it plant seeds that allow it to then dial back and public investment because you have handed them the broad sector? they are all good chapters but one that speaks to this is on this very point in the climate change states that it analyzes what it takes for these types of investments to plant the seed such that the baton gets handed off to the private sector. it is an interesting model and when i think you might want to look at. >> we heard it about ppe in the middle of the pandemic, being on dependent on china for ppe, you can use pharmaceuticals and compounds that go into drugs, critical minerals is another, supply chain dependency is a

market failure. is it much of our existing market trading system for restoring and industrial policy? >> that is what i meant when i said we still very much appreciate the value of robust trade flows. i do think there is a dividing line hi wall to that of act. if you are asking me exactly where that line falls, that's a tough question that i don't know anyone has answer to. powell is on one side of the line and advanced chips are on the others, but i don't know how far that gets you. the way i think of it, and it doesn't necessarily clarify it but something you said earlier in your comments is that we are happy to have other countries including china export

disinflation. we don't want them to export industrialization. finding out where that line goes is a dynamic project but i'll feel pretty comfortable with where we've been thus far. >> in 2019 you publish and article in a well respected magazine called foreign affairs, where you called trumps trade war kurt clearly hurting tradable sectors of the u.s. economy, especially manufacturing. the producers were suffering because of costly and complicated supply chain shifts in the trade war might induce a self inflicted recession. what happened, we've seen continuity and policy, the facts change, the situation change, or did we just change our minds?

>> i think that the policy has very much changed. we are now actively spending both significant public and way were significantly private dollars, clean energy and chips and battery production. you can go back to hamilton's essay on manufacturers to understand the rationale for tariffs in that context. i was testifying the other day on the hill with secretary ellen , the question did not come to me but they were very sharp and pointed questions, it looks like some of the resources and the ira are going to foreign companies, we very much applaud

someone coming over here, one of our friends, i should say, building factories here, that is the political and economic reality of the moment we are in. i think we have to be flexible and adjust our policies to meet industrial policy that was in the at all in place when i wrote that article. >> last question before open it up to the floor here. your address worker centric policies -- worker centered policies in your remarks. as we look back, there has been a particular lack of domestic policy over the course of decades focused on ensuring that workers can thrive in a rapidly changing economy whether it's lifelong learning, transition

assistance, we haven't done very well as a government. if you had your magic wand, what domestic policies do you think you would promote? >> i don't need a magic wand. i would argue that we are doing that in real time, i'm not taking a victory lap, but i very much like the emphasis of -- look at the geographical dispersion of where our investments are gone. the treasury department has a couple of good pieces on this. one of the worst things you can do both at the micro and macro level is let places get so hit by the globalization and

industrialization. not only building geopolitical resentments, which has been a driving force in political shifts, but you hurt your economy because you have a part of the country that is not growing in the same direction, not contributing to growth and productivity. president biden continually says things that are subtle but other presidents never say them, they speak directly to the question. if you don't have a college read, yacht to be able to make a good living. a lot of politicians, presidents, both parties say if you want to get ahead, get a college degree. that is not wrong, there is a college premium, but you know

what share of the workforce is college educated, it's about a third. there is no biden mx. policy that leaves out two thirds of the workforce. when you sense that he means where you are, what your education level is, we need to make sure there are ample job opportunities there of good quality and if the market fails to do that, we will try to channel our investments in those areas. i think generating real economic activity in areas that have been hollowed out or left behind is a great answer to that question. where we need to continue to do more is in the education and training space and that's a good discussion and i will put that out there as a flag. >> let me open it up to questions here in the room. the former cochair of the council on foreign relations. >> thank you for joining us, and i think your remarks were very well taken.

i do have a concern, i applaud that more resources are being directed to educate our population. many of our policies can be worker centric. what i have concern about is the lack of a trade policy, that is we did not go back into the transpacific partnership and others are now molding the rules that will govern us. we have not gone back to upgrade the wto, and that has stymied movement ahead. i have been told by members of the administration that when i say what is your trade policy, they say worker centric. but actually free and open trade generate the resources to allocate to other endeavors like

training the labor force, where we have been deficient for the past four decades. so what do we do to get our trade leadership back so we can generate that additional gdp to accomplish the goals that president biden has so properly set for our nation? >> well, thank you for the question, ambassador, and thank you for your service. to some extent, you are asking the big bubble question that i think i heard mike say this real econ group is sort of set up to solve. which you might argue is some kind of combination of what you just said and a set of what i would think of as political economy realities that challenge that framework in the current

political economy. so that there are positions that one could take that are consistent with earlier trade policy that would make it very hard for you to end up in a position where you are able to implement anything. i'm sorry if i'm being overly nuanced, but i think you probably know what i mean. what i will say is that someone hearing your question, which is completely legitimate question, don't get me wrong, might think that the trade flows into and out of this country have been significantly diminished, but they show otherwise. we are trying to implement the changes in the worker centered policies that i talked about, we are certainly trying to elevate the things that jake sullivan talked about in economic and national security. we're trying to be very cognizant of the role of china

and cognizant of laces that have been hollowed out and left behind. when i said we still support robust trade flows, i have the numbers to back that up. trade flows are basically as robust as ever. some of those are coming more from mexico and vietnam than they are from china and one has to be mindful is china finding its way into that mix. but i think that we can pursue the worker centered goals that i set without sacrificing the benefits of trade. >> the microphone is making its way to you. >> some of this is implicit in what you set up to now, but i have not heard explicitly two

words, nippon steel. where does this fit in to the matrix that you have laid out for us? >> if you read the president statement, which is unequivocal, there's a couple of paragraphs that answer your question. he talked about the role of act -- iconic american steel company and talked about the role of the unions. listen to the steelworkers, we did, and you can evaluate whether their thoughts about this and what is best for them are right or wrong, but the president was clear about the importance of american steel and respectful of the views of the steelworkers. >> jake sullivan in his foreign

affairs piece did something that was very unusual. he started off with the importance of economic policy is the most important issue. we've never seen a national security advisor put so much emphasis on economic policy. my question to you is, how does a democracy at the white house respond to this, how have you changed the way we do foreign policy in the sense that to get more involved in foreign policy decision-making? is that a structure by which economic input is taken into account? >> i told jake that if he keeps giving economic speeches, i'm going to give a foreign policy speech, then he's really going to wake up. i would say yes. i would say, simply put, yes. i think the ability -- it has

never been bifurcated. these are not separate tribes by a longshot. but i think that the political implications of pursuing what you would call traditional trade policy from both sides has proved to be politically destabilizing, and so we need to implement -- our belief is clear we need the kinds of intersections of good trade and good economic policy which very much has a worker centered base. worker centered doesn't just mean domestic when it comes to the international space, and i think jake was clear about that too. i think that the connection between economic outcomes in a

country that has gone through a china shock and has large and significant trade deficit since the mid-1970's to not connect that economics to politics would be political economy malpractice. so i'm glad that we've made that connection. >> we are going to have to move on, joe needs to get back to manage the political economy across the street. let me just thank jerry for joining us. he's been a terrific labor economist and has contributed enormously to the field but also help to shape good economic policymaking at the white house and over his many years in service. thank you for joining us this morning to help us launch real econ and we look forward to working with you and your colleagues as we take this forward. >> thank you. have a great day.

[applause] >> stay seated and don't pay any attention to what's behind me as they move the chairs.

>> good morning, everyone. i'm a columnist and member of the editorial board of the financial times. i'm also it came in university for half a year. i mention that because i'm thrilled to be moderate rating this incredibly important conversation, not just because i write a lot about the political economy, but in cambridge i oversee also the kings archive. it's worth looking back 80 years to win the world launched the system and eventually collaborated together for the global good. i think it is also worth looking back 105 years to the writings of keene's, like the economic consequences when the world went in a very different direction

and embraced globalism and protectionism and economic punishment or retaliation against each other with utterly disastrous consequences. if you want to know more about that, come and see the archives and the handwritten notes where he despaired of the direction in which the world was going and the degree to which people had taken globalization and free market capitalism for granted and we are suddenly realizing and you took that away. i mention that because having just heard a very interesting discussion earlier and what the cfr is doing which is so important in terms of having a conversation about the trajectory. we have two ambassadors on the stage you have been fighting for global corporation trade, free market systems or a long time. but we are at a point where we have one candidate for the election later this year who is

very openly calling for that to go into reverse, and even the white house today is embracing aspects of policymaking to very different from what was around 10 or 15 years ago. the star with you, ambassador, are you concerned with sliding back into protectionism and conflict in the way that we saw 105 years ago? >> well, i am concerned. the politics have change, and one needs to be cognizant of that and figure out a way forward that brings the politics along with you. one of the purposes of real econ is to engage the american public more broadly around what accessible policy going forward might be, that addresses some of the weaknesses of prior

attempts, but also maintains the strengths of globalization. so i am concerned, and i guess it's implicit in the conversation we been having about trade-offs that we tend to have these conversations about protectionism or isolationism in isolation from considering what the cost and benefits are. at least making those explicit, because one can go in a number of different directions, but we should be cognizant and explicit about what are the costs and benefits of doing so an alternative approaches as part of that policy process. i'm very concerned about our political dialogue and is something we are hoping to contribute to. >> there is not a lot of historical perspective on the current dialogue, are we in 1945 or in 1919 discussion, i don't

think has been had at all in washington recently. ambassador, you have been washington now for six years representing canada. it looks outwardly quite similar but has cuddly or values, or i like to think it does. you have been here under two administrations. what does american leadership mean to you, and do you actually want it on the world stage right now? >> thank you. and i think this initiative is very important and very timely. i think i'd like to start the answer to that question by saying that one of the questions this initiative is asking itself is, is there a deterioration in america and in american political leadership around the consensus of free trade and

economic leadership in the world. it is important to start from the premise that was discussed earlier and the facts of this. the united states trades more than any other country with the exception of china, the united states is both a beneficiary and the giver of more direct investment in nor come the biggest input and output for a foreign investor in the world. it's the businesses, the innovators that are providing global leadership, they are. so america is a leader in the trade and economic space. the question is, at the political level, do americans and the people that they elect want to be at the forefront of constructing the rules and the systems around that economic

activity that represent american values. and that is good for the united states, but it is good for those of us who want to partner and be on this path with the united states. hard to do, trade-offs, that was discussed this morning a few times. it's never easy, you can't make rules exactly the way you want them if you trying to do it with partners and other countries, but it seems that if there ever was a time when there were overlapping challenges in the world, geopolitical, economic security, national security, domestic lack of resilience, to get back into a place of resilience after covid, challenges with trying to find the west proper relation economically with china, now is the time.

as a neighbor, friend, closest ally, i would say of the americans, i cannot imagine a better time for it to happen and i think it is very important for the rest of the u.s. allies to take up that role. >> two comments on that. one, as the ambassador noted, one of the great strengths of the united states is the fact that what is going on outside of government, whether it's the private sector or universities or research and development or risk capital, our capability of supporting entrepreneurs and innovation which i think is the envy of the world. those are incredible assets for the u.s.. we've not yet figured out, and this could very much be part of this project, how do you take those assets and make them a tool of foreign policy, international economic policy, american leadership? the access to those kinda

programs we have here in the united states is incredible magnet for other countries. perhaps even more so, maybe even more important in tariff reductions because our tariffs are excellent quite low. so as an incentive for other countries to work with us on a number of issues, labor issues, environment issues and the like, supply chain issues, are there ways of transforming those assets into a foreign policy? the second thing is, we don't operate in a vacuum. sometimes i feel the conversation about whether we engage, whether we lead or not ignores the fact that other countries will fill the void if we are not there. there was a very famous moment when president she and president putin were together in beijing and said we are on the verge of eight 100 year change in the world and we are going to make

the change. the two of us are going to make the change. they are not necessarily proposing an alternative model for the model that was established 80 years ago, but they are proposing to take actions to weaken, undermine or pull apart that model. if we are not out there leading and engaging, others will cooperate in a way that doesn't necessarily for act -- reflect american values. >> i want to come back to that in a moment. before i do, as a canadian, you pointed out that america and canada are very, very close, have been close for many decades. if not joined at the hip. so in some ways you are the ultimate for ensuring partner or friend. has that shift toward a policy

in terms of how we imagine supply chains benefiting canada, and to what degree do you think it is clear what for ensuring means or not. since i've split my time between half a year in the u.s. and half a year in the u.k., in europe things like the inflation reduction act have really knocked people's confidence that they know what fund shoring actually means and does it mean. do you think you know what for ensuring means, and if so, would you like to explain it? >> i think at the highest level, this is an effort of increasing resilience within our countries by the linking supply chains with respect to strategic materials in particular that are necessary for economic national security for our innovative

economies. i guess i would say that is about where it stops. and i have views on that. there is no question canada has benefited in the last several months from the french agenda. we have all the critical minerals, we have a fairly ambitious critical mineral mining program and in canada we have the second highest postsecondary education rate in the world. we are very keen to grow our population. so we've got a certain dynamism that is attracting a lot from other allies in europe and japan and elsewhere. so there's no question that we are seeing the on the ground

effect of this goal to reorient certain kinds of supply chains right now. but where i feel this is limited is that certain specific transactions happening largely in the private sector with a bit of government incentive and policy behind it. but there is no framework for the world, there is no understanding among us, we are clearly friends, as to what a friend is and why they are friends and what the benefits of being a friend are. and what the consequence of not being a friend are. it sounds an awful lot like a trade agreement. it sounds like making rules around when you decide to enter into -- you choose who you want to be entering the agreement. countries choose who they want to partner with.

they have certain common sets of objectives with the countries they are choosing to partner with, and they understand that it's going to have to be mutually beneficial and that they are going to absolutely do the calculation on what they get out of it. but they have to be honest with themselves and their populations at there still will be trade-offs and that political decisions may be difficult. but the long-term benefit of that is -- if there was ever a time for reimagining how we bring ourselves together for economic prosperity, resilience, forwarding certain kinds of values in the world, fighting climate change, labor standards, human rights development, i

think now is the moment to be trying to reimagine that. the mechanisms that we -- and the tools we have are working. tariffs are low for the most part. we are 99% tariff free with the united states, but that doesn't mean we don't have improvements that can be made to the way in which our $1 trillion bilateral trade relationship could be better for both countries. so i think it is a moment of creativity. we should not be hampered by a rules-based system that is goods oriented, it is subsidies and tariffs. we need to kind of think beyond that. i think we can, and think it would be an amazing contribution for all of us for our american friends to come in and work with us to rethink this. >> as anyone who's ever been to high school knows, the concept

of a friend can be quite fickle and hard to define. we are certainly looking at one of the presidential candidates who has indicated that his definition of being friendly is even more fickle than a teenager . so i'm curious, messer, do you think that one way the cfr could help right now is to set out a definition of who exactly is a friend, who is in the policy and who is not? >> an interesting challenge. potentially i think there is something there. let's take supply chains, over a number of products, the idea of having resilience, redundancy, is inherently not a bad idea. the first rule of risk management is diversification. you never want to put all your eggs in one basket.

never want to be totally dependent on one factory or one market for all your supplies. i think frankly the private sector probably got a little complacent over the decades because it was so efficient to produce that they were not thinking necessarily through all the potential supply chain interruptions that could happen and the fragility that could be there. if you don't want to be overly dependent, where can we have reliable partners? senator neil is here, he has written a great book about regional trade, a lot of our friends are nearby, and i think being open-minded, how do you ensure reliability?

that goes somewhat to what is the nature of the relationship or the friendship, so to speak. that could be an important part of what this is going forward. >> i think you can build in today's challenges. we cannot have economic security -- the disruptions that are happening globally are very expensive and challenging for doing business. that can be built into what it is that brings us -- brings us together as a group of countries. values and faith in other than traditional goods and services sales. >> let's take a specific example, i'm curious what you would make of this. i deeply applaud the fact that you're trying to put that center stage in the discussion because that is not something which has

been articulated very clearly recently. if you look at trade-offs right now and you look at the climate issue a new look at national security, take a look at solar panels. we have a wonderful story today in the financial times about the fact that china has dumped so many solar panels on the markets in europe that they are now so cheap that they are being soothing -- being used for garden fencing. it is very expensive -- is flooding europe, knocking out all the european producers, and they are honestly being used for garden fencing. what would you do if you were suddenly president instead. what would you do for the trade over there? would you say, this is fantastic, we can have really

cheap, but at the risk of destroying any chance of america having its own supply chain around some of the panelist, or would you go down the alternative route and say, let's step -- slap on a 60% tariff immediately and make sure we keep those darn solar panels out? >> i think it is a great question. my personal view is that climate change is an area where if there is a market failure, and there is a market failure in part because there is such a urgency for it. it's not something we can wait 20 or 30 years for the market to fill up and at that time we've reached a tipping point. if you believe that, then you

may be willing to do extraordinary things to address climate change. invest in clean energy, invest in battery technology. in order to bring those things to market at scale. another might be letting in cheap solar panels because we don't have an industry pretty much for the united states. i would make a distinction between solar panels and advanced battery technology which is shot -- not yet commoditize. maybe more strategic than the solar panels. i can see the argument about how we need to keep out the solar panels even though they are demonic ties. that's exactly the kind of

conversation in the political economy and we need to kind of make those trade-offs. because they are commodities, and very much the same way that he decided to subsidize against technology and clean energy and better technology. >> the college recently put solar panels on the roof of a 600 yard long travel. i noticed just how hard it is to buy a solar panel that does not come from china right now. would you let in cheap solar panels from china, or would you impose tariffs >> what we do do if america puts down 60% tariffs on china? >> we do manufacture quite a few

solar panels in canada so we have tried to -- it is not easy, and i am also very attracted to the point that this is an urgent situation. we do need to find ways to move our economies along as quickly as possible to be dealing with the threats of climate change. i understand that the ira is very unpopular -- when it came out, unpopular with many of our european colleagues. it was a policy that canada had to adapt to as well. overall, we applaud the enormous infusion of interest in equity and activity that it has brought. i think that in the immediate

and short-term after having been adopted, because some disruption and perhaps they felt there were opportunities that were no longer available for them perhaps. but i think that is a short-lived fad, and what the president and his administration did in starting this field of activity in the united states would be a benefit for canada and for the world. i really do. it is challenging politically, they feel they don't have that kind of money to throw the problem. but in the end, for the larger problem we are all facing. >> i am much less diplomatic, and i think the concerns raised about the ira are misplaced.

for decades, europe has been, i will use the word lecturing, and be more ambitious on climate change. the reality is the u.s. innovates, mtv regulates. there was finally the political will to invest significant amounts of resources in addressing climate change. again, europe had given up the idea of doing a free-trade agreement with the united states, unlike canada and mexico.

we want you to be ambitious, but if you are ambitious in a way that forces us to do action on our side that we are uncomfortable, the reality is the urgent -- urgency of climate change, if you buy into that, you got to take extraordinary action. >> i'm going to get to questions from the audience in just a moment. i'm conscious that we have a packed room here, over 300 members are watching online. i want to ask you one quick question, you said recently that you had been talking to the trump transition team in preparation for all the possible outcomes in november. do you think that canada will be able to work collaboratively them at present?

how would canada? >> to your first question, i do think that we will be able to work collaboratively with there is a second administration. i speak to that with experience. it was not easy renegotiating the map with donald trump. for someone like me who has done this kind of work virtually for my whole career, ultimately we were seeking the same goals as we had had with three nations of islam. >> let us find ways to privilege this relationship of these countries over those who are not

in this packed as a way of some difficult choices that we had to make in further opening our countries to each other or agreeing on common sets of standards or trying to incentivize certain sectors. it wasn't simple, the application of tariffs on steel and aluminum was particularly unorthodox, and i think that we learned a lot actually together with them around the enormous integration of our countries and mexico as well. canada-u.s. trade was up at about $3.2 billion a day of goods and services trade. so that represents literally

millions of people in our two countries buying business, providing services to each other every single day. that power of the relationship in and of itself is what will get us through any misalignment maybe in objectives, it just will. your point on the 10% tariff, under the usmca, we are over 90% free with tariffs with the united states and that was -- our position was absolutely, we have gotten ourselves to virtual tear free-trade between our two countries. those were the rules that sold

an election place. [indiscernible] it's not a one-way street. 10% incoming terror for u.s. import will elicit a response from canada and mexico. and there we are back to our strained legs. actually much longer -- warmer than that. these are conversations you have to have with a future administration around what the objectives are and what the actual consequences are of some proposed idea. i wrote back then in a game of free trade, it would be of

little consequence at iron lady on one side and the cold and grass -- -- prefer collected animosity to individual happiness. >> that is simply lesson of what not to do from history. 1919 is the alternative version. on that upbeat note, let's have some question from the audience. for any member who wants to ask questions, it will be courteous but not compulsory to briefly identify yourself, and please keep the question or comment short so we can bring as many voices into the conversation is possible because we do have many very experienced voices here amongst the members today.

>> thank you, congratulations to the council and to matt for this important initiative. i will be asking -- ambassador, you're absolutely right. they're not always folks that can be our friends. for the first time i would argue in 80 years, you are up to ready, willing, to leave compliments of ukraine. i would be grateful for some conversation about what you see interdependence, economic interdependence leadership looking like when for the first time the united states isn't the only group that can have an

impact for the common good. >> what do you do when america may not want to be top dog but it's hard to be nostalgic for the cold war. it was bipolar, that lasted for 40 years. then for lack of a better term, it's all about free-market liberalism democracy. that is over. the world we are living in now is not multipolar. it is polyamorous, in that countries -- india loves the united states for our technology, our cooperation, our investment.

they love russia for munitions. the history of glass the two mystic doreen. it was the same content women called the middle countries, canada, costa rica, singapore and others. it is not us and them, it is coalitions around various subjects, whether it is supply chains are critical minerals or nato and a variety of others. it's going to be a much more complicated world going forward. whether the u.s. seeks to lead, it's not going to be able to rely on too many countries about every issue. it will have to be much more nuanced to create conditions around important purex -- i sort of welcome whether it's europe

or others generating ideas and trying to exercise leadership. at the end of the day, it usually comes down to them needing the u.s. to deliver on it ultimately. it could be different going forward. europe and the regulation being the one exception where i think they've acted unilaterally and taken action in areas where they are well structured to do that at the commission level. as a result they've had such success in establishing local norms by virtue of the size of their market and their capacity to act unilaterally. i think beyond that, whether it is ukraine, whether it is climate change, whether it is international development, whether it is reforming the global trading system. ultimately the u.s. needs to be at the table and not leading it,

otherwise it's very difficult to see how anything positive happens. >> the report will be entitled defining friendship in the polyamorous era. [laughter] i think we have a question from one of the members online, is that correct? >> hello, much appreciate the initiative and the conversations. my question is, what is the potential place for multilateralism in this world that you are describing where we are reimagining the u.s. role soon? the wto is marching in place,

not moving forward at present. that is not new. how does the united states and canada play a role on the active stage to the global economy? >> i guess what he is really asking is, is there a future? >> i think i will answer allen's question first. [laughter] i think the wto is essential as an organization where we can all hear from each other on the effects of international trade and economic policy. if you will permit me, i will

give you a very personal anecdote, when i was a fairly young trade officer in our government, i was a lawyer first and then i went to a negotiating session a little later on in my career. i was incredibly confident in my views on the topic that we are going to be debating at this meeting and that they were right and sound and from a social and economic perspective, they were absolutely the right thing to do. sitting at room with 125 nations discussing the exact same topic, more than half the people in that room salt that issue from such a different perspective than i did that there attitudes and customs were so

fundamentally different from ours. it was an incredibly important learning experience for anybody who cares about not just their own country, but all of them are fellow citizens and people across the world and their well-being. there is nowhere in the economic space that can do that like the wto. for that reason alone, for us to be able to talk to each other and listen to each other is very important. i think the fact that it is being undermined -- there is lack of confidence because of the inability to negotiate any rules of consequence. i think the institution itself does not necessarily fit for what we need to be doing today.

i am not going to propose solutions to that, i guess i would just say we need as countries to bring some flexibility to that body. if it is not working as it is constructed right now, for its two purposes, which is rulemaking and information sharing and enforcement of the rules. i do think there is a leadership issue as well. for whom that institution is vitally important is up to us to try and maintain the political support. >> as someone who is currently involved in fighting the fight for trade agreements, would you agree? >> i welcome her question, i

would say we run the risk of being posted on institutions and not on the underlying political consensus, whether said debbie tio are the you in or the world bank at the imf across the street, institutions are only as strong as the consensus of its members. what we are lacking right now, is not going to fix the wto, what we are lacking is a real dialogue among political leaders as to what they want out of a billable training system. and what the rules of the road should be for a fraud. getting together and having a real conversation about the

political consensus underlying global trade. that to me is a necessary precursor to having any real change and reform of our international institutions. >> i remembered a moment and i interviewed you offstage and asked that, and i asked you when you were in your role trying to find trade agreements and ask if anyone else other than you thought joining the ppp was a few -- was a -- one hand went up immediately in the front row, which was your wife. it is great to have a very loyal spouse. and secondly, that was the beginning of people beginning to realize just how significantly the climate was changing around trade on a world stage. anymore questions from within

the room before we go to the front, and then you will have that there. >> thank you very much. ambassadors, what lessons are we learning about the rise of democratic backsliding and how were going to incorporate it? thanks. ? which ambassador would you like to direct that to{ i don't know if it is -- i think that making sure that we are

offering as countries and alternative to other countries, china in particular, that might be interested in going in to a country that is looking for capital and offering that capital and then having sort of a coercive activity within that particular nation, or in effect on their political environment. focusing in on that and understanding how that is happening and how we can offer an alternative in those situations is very important. -- we are working quite well as a group of nations. we have partners in the pacific.

it's an important signal that's being sent in the region. we are trying to do that in the americas with the biden administration. it's designed to say, all problems cannot be solved political and economic. we want to talk about what is going on in your countries and where your biggest challenges are and how we can park together to get our private sectors integrated into the opportunities and challenges will be facing. that's an area where we have a fair bit of cohesion. i would say between canada and the united states, we are trying to work on it together. i think that's important. as it fits into a formal trade agenda, yes. eventually and absolutely, i believe that's important.

there's probably a few steps even before that. >> do you have any thoughts on that? >> i think there is very much a global battle going on between democracy and autocracy. i think the best thing that democracies can do in that mall -- battle is to demonstrate that they can deliver. domestically for their people, that they can be functional and get things done, in their processes, and that they can deliver internationally through their cooperation with other countries. it's easy for people to write the obituaries of democracies. but i think if we look back over the last several years, we've seen a talker sees that have made terrible mistakes because they are autocracies. because they lack pluralism and a free press and the ability to hold leaders to account. whether it was how china handled

the pandemic or russia's catastrophic decision to invade ukraine, both are examples of where a talker sees run aground. on the others of the coin, it's up to the democracies to demonstrate that we can do better. that we can be functional, make progress on the difficult issues that we face. that brings us right here to home, ensuring that our own processes and political mechanisms are working well. >> we have one last question. there i think. the lady. just there. yes. >> ok. hi. i'm with the software tech startup. thank you for the discussion. what struck me in the conversation today is that we focus on things like solar panels, on the defense. i would love to hear how to

think about the proactive or how we look at building new economies for the future. i would love to hear the things that canada are excited about. >> as you said earlier, private sector ironically is more committed to global mission right now than aspects of the public sector. it's great to have that. do you want to comment on that? >> if we take the economy as a whole, we overly focus on goods. goods are important. manufacturing goods are important. agriculture, very important. we are increasingly a services related economy. focusing on -- on what it take to circe -- succeed is also an important part of the agenda. that goes to the digital economy. the various issues around the

rules of a digital economy going forward. which may well define our success in being competitive going forward. our position on those issues are now being hotly debated here. i think it's important that we focus on that debate and get the input from the private sector as to what's really important in terms of setting the rules of the road for the digital economy so that we can succeed and our workers here in these sectors can succeed as well. one thing i noticed, there are some u.s. companies who are global in nature. when they are making big investment decisions, about where to build a data center or where to build out infrastructure, they go in and efficiently negotiate trade agreements with the governments of other countries and they get agreements on protection of data and data flows and the free flow of data flows and how encryption

is going to do it. all the same issues that we tend to negotiate in trade agreements. they are having to do it as a condition of their investment. even as governments pull back from pursuing that agenda, the private sector very much lives or dies on those roles, whether we are defining them or someone else. they are making sure that they are negotiating those with governments as a condition of their investment. if we partner with the private sector and learn how to do it and ensure that we are taking all the various things into account, there are a lot of legitimate concerns that have been raised. really focusing on the most important issues to our economy. >> so in terms of the economy of the future and what canada in particular is excited about, we are quite excited about being a country that sees itself from

having a value proposition from the very beginning of a supply chain. we are huge mining country. we are deeply devoted as a government to fighting climate change. we have a prime minister who will say, i want to be the most ambitious climate change fight on the planet. i'm also the leader of a product -- proud mining country. those things can be compatible and this is how. we are quite eager to try to construct a business, an economy of innovations that reconciles the complexities of the transition that we are in. both from an energy, environmental perspective but also new technologies and the innovation around that.

concretely, as i was saying earlier, we have a very strong agenda to ensure that post secondary education -- not necessarily college but post secondary education is widely available to canadians. with south korea, we are in an call the time as to who is more successful in that regard. we have a very aggressive immigration policy. we are trying to increase our population by 1.5% per year if we can. we have a whole objective of making the country diverse and have something to offer for canadians, regardless of whether they want to work in the industries that we are traditionally known for, which is wood.

or nai and advanced technologies. to the ambassador's point, our economy is driven by services largely. not only that, about 80% of our gdp is driven by small and medium-sized businesses. making sure that we are having opportunities available for people in order to innovate and all the possible ways. whether it's a micro business or a small business is also objective. there's a lot of energy and dynamism to be honest. to end on a positive note, i do think that it is a moment of freeing the hope and dynamism and opportunities to the table that we can sees as a country and as a group of countries with similar goals and objectives. and have that vision of leading. not only economically but all

the other challenges we will face. we will try to bring the vision forward in a unifying and positive way. it's not easy to do because there's a lot of other tones out there that are less positive. but you know what, i think it can be done. i really do. i think that projects like this are very important for that. each and every government committing to working internationally in the most mutually beneficial and positive ways is also essential. hard to do but it's very essential. >> thank you fascinating discussion. i took away three key points. firstly, 2024 is indeed an incredibly important juncture moment. not just because of the elections that are happening around the world including the critical one here in november. but also because there's a growing recognition that the system that's been in place for the last 50 years is not broken

but in radical need of change. secondly, it seems that there is still a strong desire for u.s. leadership for whatever system emerges next. thirdly, the question of how that's actually formulated, what nature it takes, both domestically and on the world stage in terms of economic policymaking, is very unclear. we don't know yet whether we are living in a rerun of 1945 which is the very comforting historical parallel you invoke. or 1919 which is a lot darker. either way, what we do know is that there's going to be a lot for us to try to thrash out. i very much look forward to you setting out some solutions. polyamorous or not. in the meantime, i daresay when it comes to actually laying out practical solutions and guidance

, we will all be reading it very carefully. good [laughter] [laughter] [applause]