WEBVTT - Surveillance: We Can't Deal With China on Twitter, Hormats Says 0:00:00.040 --> 0:00:02.640 Who you put your trust in matters. Investors have put 0:00:02.680 --> 0:00:07.000 their trust and independent registered investment advisors to the two 0:00:07.040 --> 0:00:10.680 and four trillion dollars. Why learn more and find your 0:00:10.760 --> 0:00:26.360 independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 0:00:26.760 --> 0:00:30.480 I'm Tom Keene with David Gura. Daily we bring you 0:00:30.520 --> 0:00:35.560 insight from the best in economics, finance, investment, and international relations. 0:00:35.960 --> 0:00:40.559 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 0:00:40.640 --> 0:00:47.400 of course, on the Bloomberg I want to bring hi 0:00:47.440 --> 0:00:50.080 Jim more now he's head of Investment Solutions at himphon. 0:00:50.120 --> 0:00:51.839 A great pleasure to have you here in the studio 0:00:51.880 --> 0:00:56.160 with us this morning than it has been thanking. Let's 0:00:56.200 --> 0:00:58.920 let me start with stuff. It's been a while. You're 0:00:59.040 --> 0:01:03.720 arguably the most important person and PIMCO, because of our listeners, 0:01:03.760 --> 0:01:07.080 can't retire. That's that's it, David. I don't even interrupt, 0:01:07.360 --> 0:01:09.400 but let me make clear a it's been a while 0:01:09.680 --> 0:01:11.959 and you're the most important person of PIMCO. There you go, 0:01:12.080 --> 0:01:13.440 and we're gonna get into that in just a moment. 0:01:13.440 --> 0:01:14.840 But let me let me start where we were, where 0:01:14.840 --> 0:01:17.040 we were with Matt Miller here just a moment ago, 0:01:17.080 --> 0:01:19.160 and if not talking about that the effects of that 0:01:19.200 --> 0:01:21.840 attack in specific, just the general sense of uncertainty that 0:01:21.880 --> 0:01:24.480 this UH leads to or continues here that we have 0:01:24.520 --> 0:01:27.199 these three attacks yesterday, there is a sense of instability 0:01:27.280 --> 0:01:30.440 and and and and a fractious Europe at this point. 0:01:30.720 --> 0:01:33.120 What is this study? Your outlook the events that we 0:01:33.120 --> 0:01:35.640 saw yesterday? You know, you know our view was was 0:01:35.680 --> 0:01:38.559 re really expected to see more Volatilian markets going forward 0:01:38.600 --> 0:01:41.399 post election, And I think this plays into it. The 0:01:41.400 --> 0:01:45.160 geopolitical risk and in this system is very large, how 0:01:45.240 --> 0:01:49.440 various UH governments react to it, how populous is react 0:01:49.480 --> 0:01:52.280 to it, and um, what it does for growth, what 0:01:52.360 --> 0:01:55.520 it does for markets UH will unfold over the next 0:01:55.840 --> 0:01:57.920 next few years. You look at market reaction, you also 0:01:57.960 --> 0:02:00.920 wonder if there's just something harder to quit ify there 0:02:00.960 --> 0:02:04.240 when you look at just optimism, investor optimism something like 0:02:04.280 --> 0:02:05.720 that when you have when you have events like this, 0:02:05.760 --> 0:02:08.120 maybe an effect that's harder to measure just based on 0:02:08.160 --> 0:02:11.840 market reaction. Sure, I mean, I think a lot of 0:02:11.880 --> 0:02:14.960 this is is yet to be determined in terms of 0:02:14.960 --> 0:02:17.360 where it goes. But you know, we're coming off an 0:02:17.400 --> 0:02:21.760 era where with the FED being very accognative really pulling 0:02:21.800 --> 0:02:25.560 forward returns over time, which you know creates some potential 0:02:25.600 --> 0:02:28.040 issues going forward over the longer term for retirees and 0:02:28.040 --> 0:02:30.720 their ability to say for retirement is is comm indicating 0:02:31.720 --> 0:02:37.440 eighty three years old and then eighty five years old? 0:02:38.520 --> 0:02:43.200 Is our actual assumption, our our life expectancy rather at 0:02:42.639 --> 0:02:48.560 a nobody's ready, let's get to the basics. What's your 0:02:48.600 --> 0:02:53.120 new assumption of actual return? That that number that we 0:02:53.240 --> 0:02:56.880 can use to model out your world of retirement. Well, 0:02:56.919 --> 0:02:58.919 if you look at where the the agg is now, 0:02:58.960 --> 0:03:00.760 you're talking about a U old of a little under 0:03:00.760 --> 0:03:03.200 two and a half percent for for bonds. In our 0:03:03.280 --> 0:03:05.200 view on stocks is maybe at two two and a 0:03:05.240 --> 0:03:07.000 half percent above that, So if you look at a 0:03:07.040 --> 0:03:11.400 sixty forty portfolio, you're somewhere under four percent. And that 0:03:11.440 --> 0:03:15.919 really creates a long term problem when you've got systems 0:03:15.919 --> 0:03:17.919 that were designing the seventies and eighties in an error 0:03:17.960 --> 0:03:21.280 where eight percent returns were achieving. Eight percent returns are achievable, 0:03:21.480 --> 0:03:23.600 and yet I'm looking at a great bull market in 0:03:23.639 --> 0:03:27.720 another double digit year eleven percent for equities? Am I 0:03:27.800 --> 0:03:32.200 running on fumes actual? I mean, how do you balance 0:03:32.360 --> 0:03:35.360 the gloom of the numbers you just gave us. With 0:03:35.440 --> 0:03:39.600 the reality of return, many people are seeing well, you know, Tom, 0:03:39.640 --> 0:03:42.120 I think you know, the reality is that people are 0:03:42.120 --> 0:03:44.760 gonna have to live save longer as they live longer. 0:03:44.800 --> 0:03:48.760 If you look at the demographic data, life expectancy goes 0:03:48.840 --> 0:03:50.760 up about one point five one point six years for 0:03:50.800 --> 0:03:55.560 every decade. When we last revisited social Security normal retirement 0:03:55.560 --> 0:03:59.920 age in three, so thirty three years ago. Um, you know, 0:04:00.120 --> 0:04:03.480 life expectancy has gone up about five years since then. 0:04:03.640 --> 0:04:07.800 So you know, fundamentally it's time to rethink about system 0:04:07.880 --> 0:04:11.040 design and I'd call in the new administration to think 0:04:11.080 --> 0:04:13.720 about entitlement reform is a very important piece of the 0:04:13.720 --> 0:04:16.400 retirement puzzle. Puzzle you say, save longer as we as 0:04:16.400 --> 0:04:18.360 we live longer. Put that into the context of the 0:04:18.960 --> 0:04:20.560 central banking news that you mentioned here a few a 0:04:20.560 --> 0:04:23.240 few moments ago. There has been a difficulty or a 0:04:24.240 --> 0:04:27.119 lack of willingness ability to save here in recent years, 0:04:27.640 --> 0:04:30.200 how are people grappling with that need to say more? Well, 0:04:30.760 --> 0:04:32.920 you know they have, they have been saving more. If 0:04:32.920 --> 0:04:35.120 you look at the savings data, it has gone up, 0:04:35.120 --> 0:04:37.960 which is which is in some sense a little bit 0:04:38.000 --> 0:04:40.839 counterintuitive considering we're a third of the way through the 0:04:40.839 --> 0:04:43.159 baby boom or hitting what we would normally think of 0:04:43.200 --> 0:04:46.320 his retirement years, so we still have another decade of 0:04:46.400 --> 0:04:49.000 the baby boom retiring. Yet if you look at labor 0:04:49.040 --> 0:04:52.240 force participation for those over fifty five, it's creeping up. 0:04:52.800 --> 0:04:55.520 And um, what's really gonna happen is you're going to 0:04:55.600 --> 0:04:58.159 have people pushing out retirement a year or maybe two years. 0:04:58.560 --> 0:05:00.719 And in order to make that equation, I balance, but 0:05:00.880 --> 0:05:02.440 is it the issue? We've got to run the break 0:05:02.440 --> 0:05:04.720 here and come back. Not only are we gonna push 0:05:04.760 --> 0:05:06.640 out retirement a year or two, I'll give you that, 0:05:07.200 --> 0:05:09.040 but really, what we're gonna do a shift to part 0:05:09.080 --> 0:05:13.480 time retirees out forever. I mean, I gotta cast it 0:05:13.520 --> 0:05:17.120 out back here. But girl wants me, he wants me 0:05:17.240 --> 0:05:20.359 part time right now. But I mean, is it going 0:05:20.400 --> 0:05:23.760 to be part time retirement America? I think that that's 0:05:24.200 --> 0:05:26.240 that's right. You're going to see more people taking on 0:05:26.320 --> 0:05:30.440 part time work. And what are normal notions of employment 0:05:30.440 --> 0:05:33.120 and full employment really mean are going to change? You know, 0:05:33.320 --> 0:05:35.640 I get in debates with walking foils, our economist and 0:05:35.680 --> 0:05:38.960 economists on the street thinking about have we reached full employment. 0:05:38.960 --> 0:05:41.320 But look at the spread between the U six and 0:05:41.360 --> 0:05:43.520 the U three and it's still is stubborn. Well, him, 0:05:43.600 --> 0:05:47.960 weren't with us with Pimco? Always good discussion on retirement 0:05:48.000 --> 0:05:49.640 when you and PIMCO and you go to all your 0:05:49.640 --> 0:05:52.719 meetings and you go to Washington, and that is there 0:05:52.760 --> 0:05:58.039 any mood of our worthy politicians to further incentivize our 0:05:58.080 --> 0:06:03.080 ability to suck money away? I haven't seen. I mean, 0:06:03.120 --> 0:06:07.200 the debates were deficient of this. Isn't that like priority 0:06:07.240 --> 0:06:10.760 one in your world? Provide incentives? Yeah? And in my 0:06:10.920 --> 0:06:13.800 world it is. I think. I think the issue is 0:06:14.320 --> 0:06:17.359 we drastically need to increase savings rates in this country 0:06:17.400 --> 0:06:21.560 if people are expecting to retire at historical arms for retirement, 0:06:22.279 --> 0:06:24.600 and um, you know, the government's capied twin a rock 0:06:24.640 --> 0:06:27.039 and a hard place in terms of the need for 0:06:27.520 --> 0:06:31.560 some amount of control over budgets and people's desire to say, 0:06:31.680 --> 0:06:35.640 help me here with this. I tuck away more money. 0:06:35.839 --> 0:06:39.320 And you know I don't cheat, I don't do anything irresponsible. 0:06:40.000 --> 0:06:44.760 The government gets paid eventually, right, eventually? Okay, then what's 0:06:44.800 --> 0:06:47.960 the debate? I mean, you know, if if I borrowed 0:06:48.000 --> 0:06:50.800 twenty bucks from David get to buy a martini. He 0:06:50.920 --> 0:06:55.240 may not get paid back. The government's gonna get paid right, Yeah, 0:06:55.400 --> 0:06:57.360 Kanos would say it's the rate of time preference. And 0:06:57.400 --> 0:06:59.680 I think one of the things you see in Washington 0:06:59.839 --> 0:07:02.039 is huge debates about the rate of time preference in 0:07:02.120 --> 0:07:04.320 terms of what public policy should be. If if people 0:07:04.360 --> 0:07:10.000 are talking infrastructure increasing debts to fund growth, that's indicating, 0:07:10.080 --> 0:07:12.360 you know, effectively a higher discount rate than those folks 0:07:12.400 --> 0:07:15.680 who are basically worried about, you know, running much tighter 0:07:16.280 --> 0:07:20.520 fiscal standards than we've than we've seen, or or um 0:07:20.560 --> 0:07:23.560 that may be necessary. There is again talk of entitlement reform. 0:07:23.680 --> 0:07:25.400 Is it anything more than lip service? You think? Are 0:07:25.440 --> 0:07:27.160 there any indications to you that we could have a 0:07:27.160 --> 0:07:29.840 Congress that now with majority of publican majority in both 0:07:29.880 --> 0:07:32.680 houses and a Republican present, we could get some movement 0:07:32.720 --> 0:07:35.520 on this. You know, a friend of mine, in response 0:07:35.560 --> 0:07:38.160 to something I wrote a few years ago about social security, 0:07:38.840 --> 0:07:42.600 had a one line quip and response which was that 0:07:42.640 --> 0:07:47.000 which gets deferred gets compounded, And and you know, I 0:07:47.360 --> 0:07:51.880 think that is is is a large problem in the process. 0:07:51.920 --> 0:07:54.120 If you think about the incentives of those people in 0:07:54.200 --> 0:07:57.160 Washington who are in the debate. They have a two 0:07:57.240 --> 0:07:59.960 year window, a four year window or six year window 0:08:00.080 --> 0:08:03.040 when you're looking at problems they're going to manifest themselves 0:08:03.600 --> 0:08:07.320 over decades. Uh. You know, people quote the Trustees report 0:08:07.360 --> 0:08:09.440 and saying that we essentially run out of money around 0:08:09.440 --> 0:08:12.440 two thousand thirty three, But it's actually worse than that 0:08:13.000 --> 0:08:17.720 because that money isn't segregated and the point where outflows 0:08:17.760 --> 0:08:21.160 exceed inflows is really going to happen to towards the 0:08:21.200 --> 0:08:24.640 back end of this incoming administration. What's the biggest concern 0:08:24.760 --> 0:08:27.000 for pension funds that you hear about. What are they 0:08:27.000 --> 0:08:30.960 most worried about? Uh, it depends if you're if you're 0:08:30.960 --> 0:08:33.559 talking corporate pension plans who have been in a regime 0:08:33.559 --> 0:08:37.280 of having to really mark to market for the last decade, 0:08:37.400 --> 0:08:40.000 they're hoping interest rates go up to close that that 0:08:40.000 --> 0:08:42.880 that deficit. If you're talking public plans, which by and 0:08:43.000 --> 0:08:45.800 large use a actual discount rate seven and a half 0:08:45.880 --> 0:08:49.480 or eight percent their crops, and the difficult problem they 0:08:49.480 --> 0:08:50.960 have is trying to get a seven and a half 0:08:51.000 --> 0:08:54.920 to eight percent return, and that I think is a 0:08:55.040 --> 0:08:57.520 very very large problem which is going to manifest itself 0:08:57.600 --> 0:09:00.520 more in the next decade in terms of the pressure 0:09:00.600 --> 0:09:07.200 puts on public satirefinance. Is a dividend growth equity a 0:09:07.320 --> 0:09:11.960 yield equivalent. I think a growth equity has some yield 0:09:12.080 --> 0:09:15.320 component um to it. The the issue is understanding what 0:09:15.400 --> 0:09:18.880 drives the volatility I mean um over the long run. 0:09:19.160 --> 0:09:22.760 You know, solid dividends, solid growth in the final companies 0:09:23.200 --> 0:09:25.960 is a source of return and a source of income. However, 0:09:26.679 --> 0:09:30.760 um there's nothing bounding it to keep volatility in check. 0:09:31.160 --> 0:09:33.120 And the other thing when you think about a pension 0:09:33.120 --> 0:09:36.760 plan with a demographic wave of running through it is 0:09:36.800 --> 0:09:39.640 you have an increasing draw on that plan, and so 0:09:39.720 --> 0:09:43.280 your ability to tolerate down drafts becomes more and more limited. 0:09:43.440 --> 0:09:47.160 If target the whole target concept, the marketed idea of 0:09:47.240 --> 0:09:51.560 target portfolios, is that something you can theoretically get behind 0:09:52.280 --> 0:09:56.000 or are they a marketing gimmick? Now I think there 0:09:56.080 --> 0:09:59.120 there's value to it. I think that the crux of 0:09:59.160 --> 0:10:02.560 the difficulty is understanding the design. Are you designing on 0:10:02.800 --> 0:10:05.480 the four one K side? You know some sort of 0:10:05.520 --> 0:10:08.959 accumulation vehicle. Are you're actually thinking about a vehicle that 0:10:08.960 --> 0:10:12.840 that transfers to a position to limit risk sufficiently uh 0:10:12.880 --> 0:10:16.040 to bussition a retire you to actually have meaningful draw 0:10:16.080 --> 0:10:22.280 down without huge down draft risk. Fascinating. We could, I 0:10:22.280 --> 0:10:24.880 could go. You gotta show up more often. I will. 0:10:25.040 --> 0:10:28.440 I mean, you know, please Jim Moore with PIMCO on 0:10:28.800 --> 0:10:31.160 our lack of retirement. I mean, David, I'm going to 0:10:31.200 --> 0:10:36.520 be sitting here forever. David Gura's back. Scarlett Fu is 0:10:36.600 --> 0:10:42.800 with us. She was a good it's a very very 0:10:42.880 --> 0:10:46.800 successful audition. We've done that that for David Gurrow, we think, 0:10:46.880 --> 0:10:50.360 and Tom Keene with you worldwide, stay with us. This 0:10:50.559 --> 0:11:04.280 is gloom. Why don't you bring in our steam gast 0:11:05.080 --> 0:11:06.920 Bible formats joins us now in the studio. He has 0:11:07.000 --> 0:11:09.400 Vice Chier of Kissinger associate. It's great to have you 0:11:09.440 --> 0:11:11.559 here on the heels of a trip to China, and 0:11:11.600 --> 0:11:13.680 maybe we can return to what Michael Barr was talking 0:11:13.679 --> 0:11:15.400 about a few moments ago, that is the return of 0:11:15.440 --> 0:11:18.320 that underwater at drown, the Chinese returning it to the U. 0:11:18.480 --> 0:11:20.280 S what do you make of the incident itself? The 0:11:20.400 --> 0:11:24.000 Chinese saying that has been greatly overblown. It did take 0:11:24.040 --> 0:11:25.959 on some import here over these last few days. I 0:11:26.000 --> 0:11:28.360 think the Chinese has been very wise in trying to 0:11:28.640 --> 0:11:33.320 lower tensions with the United States, particularly during this transition period. 0:11:33.920 --> 0:11:38.960 They don't want any big confrontational issues while the Trump 0:11:39.000 --> 0:11:43.559 team is assembling uh it's secretaries and its national security 0:11:43.559 --> 0:11:46.559 advisors and others, And I think that's probably right. They 0:11:46.559 --> 0:11:49.360 want to wait and see what Trump's policies are. They 0:11:49.360 --> 0:11:52.040 don't want to give them any pretext for taking a 0:11:52.160 --> 0:11:55.960 very tough line against China, at least rhetorically. At this point. 0:11:56.240 --> 0:11:58.520 It's not an easy decision for China because there is 0:11:58.920 --> 0:12:02.560 strong nationalistic pressure in China to take tough action. But 0:12:02.600 --> 0:12:05.439 I think the wisdom of Chinese authorities is prevailing and 0:12:05.559 --> 0:12:07.920 they did the right thing. How many people told Bob 0:12:07.960 --> 0:12:11.720 Hormant's to get or not get a Twitter account? How 0:12:11.760 --> 0:12:16.320 many the table when Hormats considered entering the modern age 0:12:16.360 --> 0:12:19.320 from the quill Well I started a couple of years ago. 0:12:19.440 --> 0:12:22.319 It's it's been very interesting all the twitters you get. 0:12:22.360 --> 0:12:25.839 You got a very good reaction from this from from 0:12:25.840 --> 0:12:31.360 the show, continued show, continuously good reactions and very good comments. 0:12:31.360 --> 0:12:33.680 So I always pay a lot of twitters when I 0:12:33.720 --> 0:12:36.440 and I love how you do real Bob Hormant's, we 0:12:36.520 --> 0:12:39.720 should tell China that we don't want the drone they 0:12:39.880 --> 0:12:46.079 stole back, hyphen let them keep it exclamation point. They 0:12:46.080 --> 0:12:48.840 didn't teach this the toughs, did they. No, I don't 0:12:48.880 --> 0:12:51.280 know where that came from. Came from the President elect 0:12:51.280 --> 0:12:54.200 of the United States. I don't I know who said it, 0:12:54.240 --> 0:12:57.160 but I don't understand where the thought came from. It 0:12:57.200 --> 0:13:00.600 doesn't didn't seem to explain to our a political audience 0:13:00.640 --> 0:13:06.320 the ramifications of the words stole or the word let 0:13:06.400 --> 0:13:10.040 them keep it. Well. I would say that it would 0:13:10.080 --> 0:13:15.080 be very wise for President Electromp to say nothing about 0:13:15.240 --> 0:13:19.160 China at this point. He ought to form his team 0:13:19.240 --> 0:13:23.480 of advisors his cabinet, and they ought to develop a 0:13:23.520 --> 0:13:27.840 strategy visa of each China that makes sense in the 0:13:27.920 --> 0:13:30.440 long term. We've got to deal with the Chinese, who 0:13:30.480 --> 0:13:34.120 may not like everything they do or say. But China 0:13:34.400 --> 0:13:38.240 is a major power, and you simply cannot deal with 0:13:38.320 --> 0:13:41.920 them through Twitter. To me, it is demeaning if they 0:13:41.920 --> 0:13:44.120 were to do the same thing to us. Would be 0:13:44.200 --> 0:13:47.160 very unhappy for us to treat China in the same 0:13:47.160 --> 0:13:51.480 way with twitters back and forth. Makes China, David, you 0:13:51.480 --> 0:13:54.000 can have the whole next block. That's why Prosadic Cornell 0:13:54.080 --> 0:13:59.120 is pretty good. Prosade a scathing piece and project syndicate 0:13:59.200 --> 0:14:02.520 on China in the President elect over the weekend. You 0:14:02.600 --> 0:14:06.280 were just in China. How do they respond in your 0:14:06.320 --> 0:14:10.400 conversations to the President elect. Well, they're very puzzled at 0:14:10.559 --> 0:14:13.319 what his real policies are going to be. They've made 0:14:13.360 --> 0:14:15.880 a very clear point of saying they're not going to 0:14:16.040 --> 0:14:20.520 overreact at the moment. On the other hand, they see 0:14:20.560 --> 0:14:23.400 what he said and heard what he said during the campaign. 0:14:23.800 --> 0:14:26.640 He was going to find them a currency manipulator. He 0:14:26.720 --> 0:14:28.760 was going to go after them on a variety of 0:14:28.800 --> 0:14:34.160 trade issues, and he dumping cases, countervailing duty cases. Uh, 0:14:34.400 --> 0:14:39.200 negative views on Chinese investment. Uh. There are issues with China, 0:14:39.280 --> 0:14:41.400 to be sure, but the way to deal with the 0:14:41.480 --> 0:14:47.000 Chinese is not to confront them overtly, particularly not through Twitter. 0:14:47.080 --> 0:14:50.160 It's to have serious conversations. He ought to wait, have 0:14:50.720 --> 0:14:54.280 his experts meet with the Chinese experts. If he has views, 0:14:54.320 --> 0:14:56.920 if he has concerns, he has complaints, put them to 0:14:57.000 --> 0:15:03.680 the Chinese quietly, clearly, but quietly, and not on confrontation publicly. 0:15:03.960 --> 0:15:05.680 I don't think I've ever seen you wound up like that. 0:15:05.800 --> 0:15:08.480 You should tweet out today change your handle to the 0:15:08.520 --> 0:15:10.920 real Bob Hormetts. A few moments ago you were talking 0:15:10.960 --> 0:15:14.520 about what amounts to a good relationship between China US. 0:15:14.560 --> 0:15:17.200 It doesn't take place on on Twitter. When you look 0:15:17.200 --> 0:15:19.720 at the team that Donald Trump has begun to assemble 0:15:19.760 --> 0:15:22.560 here with the Governor of Iowa Terry Branstead as the ambassador, 0:15:23.280 --> 0:15:25.320 what sense are you getting about policy from that? In 0:15:25.320 --> 0:15:27.200 other ways, we had the rhetoric on the campaign trail. 0:15:27.720 --> 0:15:29.440 From that we moved to policy. Are we getting a 0:15:29.440 --> 0:15:31.240 clear sense of the shape that that is going to take? 0:15:31.520 --> 0:15:33.880 Not really. I think Terry Brandstead is a good pick 0:15:34.000 --> 0:15:37.920 for ambassador. He knows chigin paying person shin Ping quite well. 0:15:38.640 --> 0:15:43.200 He knows China well. Um, the new Secretary of State Killerson, 0:15:43.720 --> 0:15:46.920 I'm sure knows China well. But you really have to 0:15:47.000 --> 0:15:51.320 make policy towards China at the top. You need to 0:15:51.320 --> 0:15:55.520 have a strategy. It can't just be ad hoc individual decisions. 0:15:56.280 --> 0:15:58.680 And he needs to have a team of China experts. 0:15:58.760 --> 0:16:00.720 I don't know who they are. If he has them, 0:16:00.880 --> 0:16:03.240 they need to sit down and spend some time thinking 0:16:03.280 --> 0:16:06.920 about not just what they say on a given day, 0:16:06.960 --> 0:16:10.080 but the implications of what they say over a couple 0:16:10.080 --> 0:16:13.440 of year period and what the long term relationship is. 0:16:13.680 --> 0:16:15.560 If they want to take a tough view on a 0:16:15.840 --> 0:16:17.880 on a set of issues, they ought to have a 0:16:17.880 --> 0:16:21.720 clear way of working out a solution with the Chinese. 0:16:21.720 --> 0:16:25.800 Simply confronting the Chinese is not going to get anywhere 0:16:25.840 --> 0:16:29.040 because the Chinese have their own nationalistic pressures and they 0:16:29.040 --> 0:16:31.920 will hit back. It's not Burundi, this is China, this 0:16:32.000 --> 0:16:34.800 is the Middle Kingdom. This is a big country. We're 0:16:34.800 --> 0:16:38.000 gonna have to work with them because virtually nothing is 0:16:38.040 --> 0:16:42.360 going to happen internationally for the good, certainly unless the 0:16:42.440 --> 0:16:45.280 United States finds a way of working with China in 0:16:45.320 --> 0:16:48.800 a constructive fashion. Confrontation is not an answer to anything. 0:16:49.040 --> 0:16:52.520 To be disruptive financially and disruptive politically and from a 0:16:52.560 --> 0:16:54.840 security point of view. How hard is it to maintain 0:16:55.000 --> 0:16:57.280 these two focuses, one of national security the other on 0:16:57.880 --> 0:17:00.960 economics for a government. Well, we've been able to do 0:17:01.000 --> 0:17:03.560 it reasonably well. The economic part of the relationship with 0:17:03.640 --> 0:17:08.280 China has evolved. I think China is somewhat more nationalistic 0:17:08.359 --> 0:17:12.000 economically as are we. So we're gonna have to figure 0:17:12.000 --> 0:17:15.120 out a way of working with them By pulling out 0:17:15.160 --> 0:17:17.560 of t p P. We give China a lot of 0:17:17.680 --> 0:17:21.840 latitude to draw up the rules of trade, particularly in 0:17:21.920 --> 0:17:25.440 the Asia Pacific region. They really don't think, and a 0:17:25.520 --> 0:17:27.640 lot of our allies now don't think we have very 0:17:27.720 --> 0:17:30.879 much staying power in the region. From a political and 0:17:30.960 --> 0:17:33.840 national security point of view, we've had closer mill with 0:17:33.880 --> 0:17:37.359 the called mill mill relations military to military relations. There 0:17:37.359 --> 0:17:39.880 are ways of working with the Chinese on South China 0:17:39.880 --> 0:17:42.240 see and other things, but it takes a lot of 0:17:42.280 --> 0:17:45.040 work and a lot of meetings at various levels over 0:17:45.080 --> 0:17:48.720 a period of time. Not one shot statements by the 0:17:48.760 --> 0:17:53.080 president day particulated by Twitter. You keep going back to 0:17:53.119 --> 0:17:55.879 that at Messador har Mats You're wonderful book The Price 0:17:56.000 --> 0:17:59.200 of Liberty, the first sentence, the final chapter. I love this. 0:18:00.040 --> 0:18:03.880 Henry Kissinger has written that quote America's journey through international 0:18:03.960 --> 0:18:09.520 politics has been a triumph of faith over experience. What 0:18:09.680 --> 0:18:13.480 is Donald Trump's faith? Well, I don't know. At this point. 0:18:13.680 --> 0:18:16.440 He seems to think that he can take very tough 0:18:16.560 --> 0:18:20.360 lines against the Chinese and the Chinese will somehow do 0:18:20.480 --> 0:18:26.120 what he asked them for. Putin phil Yes, yes, but yes, 0:18:26.160 --> 0:18:29.640 it's it's seeming a much different view of Putin than 0:18:29.760 --> 0:18:32.840 he does of President hire Jim paying Um. He's he's 0:18:32.840 --> 0:18:36.080 talking very negatively about China, very positively. So it's a 0:18:36.119 --> 0:18:40.320 bluster of say Theodore Roosevelt. But I'm not comparing him 0:18:40.320 --> 0:18:45.360 to President Roosevelt. But the your study of the diplomacy 0:18:45.359 --> 0:18:48.680 of bluster, which I think we can all agree, including 0:18:48.680 --> 0:18:52.160 Trump supporters, there's a lot of that here. How does 0:18:52.160 --> 0:18:55.439 that play in the modern age? It doesn't play very well. 0:18:55.480 --> 0:18:59.440 I mean, if you want to be tough, then as 0:18:59.600 --> 0:19:03.600 as clearly does, then there's room for being tough, but 0:19:03.720 --> 0:19:06.600 you need to have a strategy behind it, and you 0:19:06.680 --> 0:19:10.520 need to have some kind of dialogue with the Chinese 0:19:10.840 --> 0:19:14.120 to assert your view and come up with the kind 0:19:14.119 --> 0:19:18.440 of answers that you want. And it cannot be they 0:19:18.480 --> 0:19:21.720 do everything we asked them to do. They're not in 0:19:21.800 --> 0:19:24.000 that mode anymore. They're not a weak country. They have 0:19:24.040 --> 0:19:26.720 their own national interests. We have to figure out some 0:19:26.800 --> 0:19:31.320 way of of achieving our goals, but the Chinese have 0:19:31.400 --> 0:19:33.600 to get something out of the deal. It's not going 0:19:33.640 --> 0:19:36.080 to be a one sided thing. And he's got to 0:19:36.119 --> 0:19:39.359 think these things through before he he does them, because 0:19:39.400 --> 0:19:42.960 the consequences of a confrontation with China, between the US 0:19:43.040 --> 0:19:44.960 and China, but also for a lot of the other 0:19:45.040 --> 0:19:48.120 friends and allies in the region, that would be catastrophic. 0:19:48.160 --> 0:19:50.440 They don't want to be in the middle of a 0:19:50.480 --> 0:19:55.639 confrontation between Beijing and Washington. We've we've seen the establishment 0:19:55.680 --> 0:19:57.960 of a regular dialogue between China the U S. The 0:19:57.960 --> 0:20:01.240 Strategic Economic Dialogue happening I think every two years, every 0:20:01.280 --> 0:20:05.520 every year, every year now changing location every every every year. UM. 0:20:05.600 --> 0:20:08.199 If that disappears, what is the form here for for 0:20:08.280 --> 0:20:11.399 conversations between these these twogether? We still presumably would have 0:20:11.520 --> 0:20:17.800 summit meetings between our two presidents periodically. We have APEC meetings. 0:20:17.920 --> 0:20:20.040 China and the US are both members of APEX. There 0:20:20.040 --> 0:20:23.120 are other groups, UH, the S and need S. Reg 0:20:23.320 --> 0:20:26.399 Economic dialogue that you mentioned is a very useful vehicle. 0:20:26.440 --> 0:20:28.159 I think their ways of improving and I used to 0:20:28.200 --> 0:20:31.800 go to them on a regular basis. They're useful because 0:20:31.840 --> 0:20:34.560 they're a multitude of issues between the United States and China. 0:20:34.560 --> 0:20:37.439 We've made progress on environmental issues, as I say, on 0:20:37.560 --> 0:20:40.880 mill mill issues, military and military issues, there actually has 0:20:40.920 --> 0:20:44.040 been some progress. There are other issues that we still 0:20:44.080 --> 0:20:50.240 need to make progress on intellectual property protection, trade, secrets, protection, 0:20:50.680 --> 0:20:52.359 a number of other things. And there are a number 0:20:52.359 --> 0:20:56.400 of geopolitical issues. They're going to be there a rising power. Traditionally, 0:20:56.520 --> 0:21:00.720 rising powers and existing powers have issues that need be resolved. 0:21:01.040 --> 0:21:03.119 So we're gonna have to get to it in a 0:21:03.200 --> 0:21:06.840 serious way. And and by say but when I say serious, 0:21:06.880 --> 0:21:09.119 I mean the leaders are gonna have to sit down 0:21:09.480 --> 0:21:11.680 and try to work these things out. And Trump is 0:21:11.720 --> 0:21:15.040 gonna have to understand the Chinese a lot more than 0:21:15.080 --> 0:21:18.280 he does, and understand they have nationalistic pressures too. They 0:21:18.280 --> 0:21:20.919 may not be a democracy, but they have very strong 0:21:21.000 --> 0:21:24.520 public opinion and they have very strong national interests, as 0:21:24.560 --> 0:21:26.440 do we. The question is how do we work out 0:21:26.480 --> 0:21:28.760 in a national interests in a constructive way. In these 0:21:28.840 --> 0:21:30.480 last few minutes we have here, Let's turn to Europe. 0:21:30.880 --> 0:21:33.200 The events we saw yesterday on the heels of the 0:21:33.200 --> 0:21:36.560 referenum in Italy, on the heels of the the referenum 0:21:36.560 --> 0:21:39.520 in the United Kingdom. Let's look ahead the two thousand 0:21:39.600 --> 0:21:43.199 seventeen in your sense of how that fractiousness continues, how 0:21:43.200 --> 0:21:45.439 it begins to prepare itself. What do you see happening 0:21:46.600 --> 0:21:51.800 these referend uh, the Ramsey referend on restructuring the Italian 0:21:51.880 --> 0:21:55.919 Senate and bregs. It illustrate that in Europe they have 0:21:56.080 --> 0:22:03.480 the same sorts of nationalistic pressures, anti international pressures, economic 0:22:03.600 --> 0:22:08.040 zine of phobia, anti immigration pressures that a number of 0:22:08.080 --> 0:22:11.720 other countries do, including the United States. I think what's 0:22:11.760 --> 0:22:15.080 troublesome about Europe is the whole vision of the whole 0:22:15.240 --> 0:22:18.679 what they call European Project start out as a political 0:22:19.480 --> 0:22:23.080 objective to pull Europe together politically and man economically. It's 0:22:23.119 --> 0:22:26.120 become much more technical now, and I think it has 0:22:26.160 --> 0:22:29.160 to be restored in a way that the irage European 0:22:29.200 --> 0:22:32.840 citizen understands it and benefits from it. It's gotten too technical, 0:22:33.000 --> 0:22:36.399 it's gotten away from the kind of popular support that 0:22:36.440 --> 0:22:39.680 it needs to sustain itself. Ambassador, thank you so much, 0:22:39.720 --> 0:22:42.720 Bob Horman. It's very generous of your time this morning. 0:22:42.720 --> 0:22:45.120 He's with Kissinger Associates, and of course, as a former 0:22:45.200 --> 0:22:50.760 under Secretary of State for the President. President, maybe it's 0:22:50.760 --> 0:22:52.560