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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Old Blots podcast.

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Speaker 2: I'm Tracy Allaway.

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Speaker 3: And I'm Joe. Why isn't thal Joe?

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Speaker 2: We are recording this in August twenty twenty four, which

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Speaker 2: means there's only six years to go. Six years to

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Speaker 2: what six years until? According to John Maynard Keynes, we

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Speaker 2: will have an era of abundance.

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Speaker 4: Right.

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Speaker 2: He wrote in nineteen thirty that he thought technological development

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Speaker 2: would mean in one hundred years, which would be twenty thirty,

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Speaker 2: that we would have a plethora of goods and elevated

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Speaker 2: living standards and reduced working times and everything will be great.

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Speaker 2: So I'm excited.

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Speaker 5: Yeah, I think I can hang on with the sort

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Speaker 5: of charge and toil scarcity mindset for another six years.

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Speaker 3: Then we were reached nirvana here on earth.

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Speaker 2: I mean, to be fair, he did sort of caveat.

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Speaker 3: It, and I say, I have no idea where you're

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Speaker 3: going with this.

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Speaker 2: Yeah, okay, I promise I have a point and you're

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Speaker 2: actually going to remember it in a second. But first

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Speaker 2: I'm going to say that Caines did caveat his forecast,

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Speaker 2: and he basically said, as long as there are no

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Speaker 2: big wars or population booms. And that was in nineteen

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Speaker 2: thirty so, you know, bad timing for both wars and

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Speaker 2: population boos.

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Speaker 3: So yeah, a few things happened. Maybe we've got to

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Speaker 3: kick it back another fifty.

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Speaker 2: Years, okay, But my point is, you know, in twenty

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Speaker 2: twenty four, it feels like instead of abundance, there is

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Speaker 2: very much And you touched on it just then this

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Speaker 2: focus on scarcity. So maybe we have like, yeah.

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Speaker 3: We love done here, Tracy, thank you.

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Speaker 1: So maybe we.

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Speaker 2: Have a lot of different types of goods that are

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Speaker 2: available to us now, you know, I can go buy

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Speaker 2: a pretty cool TV for not that much money. But

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Speaker 2: in the past four years or so, we have seen

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Speaker 2: shortages of very important items that have emerged.

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Speaker 5: Yeah, and I would classify this into sort of two

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Speaker 5: categories in my head, which is that there was sort

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Speaker 5: of the acute scarcity of specific things that we saw

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Speaker 5: during the COVID shock, and so you know, there were

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Speaker 5: things like oh, suddenly we have a scarcity of protective

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Speaker 5: equipment for doctors, or a certain type of lagging edge

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Speaker 5: chip that went into automobiles, certain things like that that

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Speaker 5: really became like scarce in that moment. But then I

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Speaker 5: would say that maybe awakened a consciousness that we have

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Speaker 5: these long term scarcities that are strategic in nature. So

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Speaker 5: suddenly people worried about, well, do we have the minerals

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Speaker 5: that we need in order to build out a domestic

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Speaker 5: electric vehicle supply chain, do we have the industrial to

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Speaker 5: build out things like semiconductors, concerns about the medical supply chain.

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Speaker 5: And these are like long term strategic questions that aren't

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Speaker 5: just related to sort of that exogenous shock that we

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Speaker 5: got in March twenty twenty.

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Speaker 2: Absolutely, and you just mentioned industrial capacity there. It does

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Speaker 2: feel like governments around the world, and certainly the US,

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Speaker 2: have become more active in how they manage some of

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Speaker 2: these concerns. And I don't know if you remember, but

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Speaker 2: back in twenty twenty, I think I frame this as

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Speaker 2: like the choke point economy, where people become more concerned

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Speaker 2: about the relative flow of goods and the idea of

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Speaker 2: choke points in specific supply chains that sort of cascade

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Speaker 2: through the rest of the economy. That was before we

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Speaker 2: all started talking about the resurgence of industrial policy, but like,

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Speaker 2: this is kind of what we're talking about.

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Speaker 5: And then I think the other really important dimension here,

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Speaker 5: and it fits right into what you're saying, is that

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Speaker 5: we're seeing when it comes to things like industrial policy

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Speaker 5: or reindustrialization, or this effort to build up semiconductor capacity.

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Speaker 5: Part of it is sort of like pure economics, but

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Speaker 5: is where you get this real intersection of economics and

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Speaker 5: international security geopolitical anxiety, because a lot of this stuff

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Speaker 5: is like building up capacity domestically in areas in which

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Speaker 5: possible strategic rivals are independence of our.

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Speaker 2: Right, and then of course how do you balance strategic

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Speaker 2: independence with the risk of autarchy?

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Speaker 3: Right, that's right.

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Speaker 2: So I'm very pleased to say that we're getting back

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Speaker 2: to our CIRCU twenty twenty roots. We're going to be

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Speaker 2: talking about supply chains and a lot of other interesting things.

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Speaker 2: But we really do have the perfect guest. We are

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Speaker 2: going to be speaking with Deleep Seeingh. He is, of

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Speaker 2: course the Deputy National Security Advisor for International Economics in

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Speaker 2: the Biden administration. He's also the Deputy Director of the

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Speaker 2: National Economic Council. He previously worked at Treasury and the

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Speaker 2: New York Fed and Goldman and p Jim. So truly

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Speaker 2: the perfect lots guest. Delip, thanks so much for coming

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Speaker 2: on the show.

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Speaker 4: Nice to be with you, Tracy and Joe.

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Speaker 2: I think you are also the first all lots guests

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Speaker 2: that might be coming to us from a secured, confidential

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Speaker 2: room in the White House. So that's why the audio

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Speaker 2: sounds a little bit different.

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Speaker 4: Glad to be a pioneer. Yeah, you can, you can

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Speaker 4: rest assured the line of secure.

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Speaker 2: Okay, So I mentioned your career summary and it is

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Speaker 2: very long. I just want to make sure did I

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Speaker 2: hit all the important talking points? What have you been

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Speaker 2: doing up until this particular moment.

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Speaker 4: Yeah, I mean it's kind of a nonlinear career path.

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Speaker 4: Some might say an incoherent one. But yes, I've spent

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Speaker 4: roughly half of my career in the private sector, first

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Speaker 4: in the tech boom during the nineties, then in financial

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Speaker 4: markets at Goldman as the world hyper globalized during the

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Speaker 4: two thousands, and then after the Financial Crisis of eight

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Speaker 4: I've mostly been in government service at the Treasury, FED

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Speaker 4: and now at the White House, excluding a year and

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Speaker 4: a half at PGM as the Global Chief Economist and

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Speaker 4: a similar type of role during the early Trump years.

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Speaker 4: But really, the way I make sense of it is

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Speaker 4: I've just my careers lived at the intersection of economics, geopolitics,

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Speaker 4: and markets. It's essentially what I studied as an undergrad.

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Speaker 4: Also in grad school. I actually thought, coming out of

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Speaker 4: grad school, I might start a company in a developing

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Speaker 4: country that could do well and maybe do some good.

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Speaker 4: But my timing was pretty terrible. I was coming out

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Speaker 4: of grad school in two thousand and three just after

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Speaker 4: the dot com bubble had burst, and the moment wasn't

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Speaker 4: exactly right for someone like me to get funded. And

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Speaker 4: I also had hundreds of the hundreds of thousands of

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Speaker 4: dollars in debt, so I grambled and took the only

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Speaker 4: offer that was made to me, which was at Goldman Sachs.

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Speaker 4: But you know, it gave me a particular lens through

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Speaker 4: which to view the world, and over time I realized

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Speaker 4: that sometimes you can see the world most clearly through

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Speaker 4: the lens of markets, but I wanted to have I mean,

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Speaker 4: I recognize that sometimes that lens can get distorted, and

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Speaker 4: at other time it's better to look at the world

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Speaker 4: through the lens of geopolitics or economics or technology. And

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Speaker 4: my aspiration was to acquire as many lenses as possible.

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Speaker 4: You know, if you want to make a push on

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Speaker 4: the world, towards what it should be. You first have

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Speaker 4: to see it for what it is.

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Speaker 2: Joe, this is how I ended up at Bloomberg for

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Speaker 2: my first job. They were the only news organization in

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Speaker 2: London that was actually paying their interns, and so there

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Speaker 2: you go, I realized I needed money.

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Speaker 5: No, but the way you describe your career, you know,

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Speaker 5: if you want to change the world, you first have

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Speaker 5: to understand it. I think is like a like Tracy said,

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Speaker 5: the perfect odd lots guests, especially given your private sector roles,

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Speaker 5: public sector roles, economics, politics and markets, economics, geopolitics and markets,

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Speaker 5: all the things that were interested. What does a Deputy

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Speaker 5: National Security Advisor for international economics do?

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Speaker 3: What is that role?

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Speaker 4: Yeah, So basically it's to take on challenges that are

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Speaker 4: at the intersection of economics and national security, whether they're

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Speaker 4: domestic or or international. And the premise is that economic

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Speaker 4: security is national security and vice versa. So if we're

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Speaker 4: going to have strength at home, then we need to

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Speaker 4: heal our divisions and revitalize our economy. That's what allows

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Speaker 4: us to lead abroad. And if we can lead abroad

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Speaker 4: from a position of strength, we'll create a safer, more

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Speaker 4: prosperous world that reinforces all of our efforts at home.

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Speaker 4: So I mean to bring it to life. Yeah, let

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Speaker 4: me just give you an example of a few examples

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Speaker 4: of what I do and no particular order. How can

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Speaker 4: we launch a positive democratic alternative to the belt Road initiative?

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Speaker 4: Can we design sanctions that change the calculus of Putin

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Speaker 4: on prosecuting his war in Ukraine? Can we unlock the

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Speaker 4: value of the Russian Central Bank reserves that we froze

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Speaker 4: for the benefit of Ukraine as it fights for freedom.

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Speaker 4: Can we design export controls in a way that don't

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Speaker 4: dull the incentive for innovation You were talking about this

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Speaker 4: in your opening, without seeding our crown technological jewels to

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Speaker 4: a strategic adversary. Can we help to break the dead

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Speaker 4: impact in the developing world to showcase our value proposition

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Speaker 4: to countries that might be skeptical about our intentions? And

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Speaker 4: then the passion project for me really is, can we reimagine,

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Speaker 4: invent or revitalize the tools and institutions of American financial firepower?

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Speaker 4: Because I mean, my view is we're living in the

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Speaker 4: most intense period of geopolitical competition, at least since the

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Speaker 4: Cold War ended. Maybe going much further back, and since

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Speaker 4: the great powers of today are also nuclear powers, you know,

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Speaker 4: barring catastrophic miscalculation, the logic of mutually assured destruction probably

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Speaker 4: suggests that when confrontation occurs, it's less likely to play

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Speaker 4: out on the military battlefield than it will in the

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Speaker 4: theater of economics and technology. So we'd better go into

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Speaker 4: this competition well armed, and we need to actually think

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Speaker 4: really hard about how to.

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Speaker 3: Do that cracy. We might get to this later, but

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Speaker 3: one area that it might play out as in the

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Speaker 3: Arctic circle.

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Speaker 2: Oh yes, well, we should definitely talk about that. I'm

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Speaker 2: trying to think of an elegant seg from mutually assured

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Speaker 2: destruction back to supply chains, but I'll just do it, okay.

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Speaker 2: So in twenty twenty, during the pandemic, we kind of

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Speaker 2: woke up to the risk of supply chain disruptions and

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Speaker 2: we saw a variety of things both big and small

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Speaker 2: in terms of importance. So everything from I guess gatorade

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Speaker 2: to the needles needed for vaccines and things like that.

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Speaker 2: Suddenly there was a shortage. How do you in your

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Speaker 2: position even begin to identify potential risks in the supply chain,

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Speaker 2: and how do you go about evaluating their relative strategic importance.

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Speaker 4: Yeah, so I mean this term, this phrase that gets

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Speaker 4: thrown around supply chain resilience. I really think our task

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Speaker 4: is to go beyond the abstractions and try to get

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Speaker 4: into what it means in practice. And the context really matters,

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Speaker 4: because the effort to revitalize our supply chain resilience, it's

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Speaker 4: happening in the context of a multiplayer, multi stage geopolitical

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Speaker 4: competition that's playing out across the world. So let me

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Speaker 4: try to explain what I mean. So when people use

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Speaker 4: this term supply chain resilience, the first question that we

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Speaker 4: ask is resilience against what kind of shocks? Because they

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Speaker 4: could be economic shocks, they could be geopolitical, climate health,

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Speaker 4: all of the above. And each of these shocks, if

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Speaker 4: they occur individually or collectively, they impose different kinds of

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Speaker 4: stress on supply chains. So first, resilience against what? And

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Speaker 4: then the second question is how do you define resilience.

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Speaker 4: It comes in many different forms. It could be production capacity,

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Speaker 4: It could be diversification of suppliers and buyers, you know,

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Speaker 4: it could be having sufficient stockpiles that could plausibly absorb

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Speaker 4: an exogenant shock, or it could be supply chain agreements

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Speaker 4: with trusted partners that can surge capacity when the good

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Speaker 4: or technology is scarce at home. And so, you know,

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Speaker 4: what we have to evaluate now is should we think

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Speaker 4: of these forms of resilience as economically equivalent or politically equivalent?

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Speaker 4: And then is it really resilience that we're after? You know,

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Speaker 4: maybe resilience is appropriate for certain supply chains, like you

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Speaker 4: mentioned masks. In that category of good, you could argue

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Speaker 4: we have no comparative advantage and margins are quite low,

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Speaker 4: and so maybe resilience is the right word. But maybe

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Speaker 4: resilience isn't really enough for a supply chain in which

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Speaker 4: we have a clear national security nexus, like leading edge semiconductors,

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Speaker 4: where the barriers to entry are very high, the economies

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Speaker 4: of scale are very large, and you really want dominance.

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Speaker 4: So I think there's a continuum between resilience and dominance,

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Speaker 4: and you have to decide where do you want to

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Speaker 4: be on that continuum. And then the fourth step is

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Speaker 4: once once we define what we mean by resilience and

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Speaker 4: we clarify with ourselves and our partners, is it really

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Speaker 4: resilience we're after in this supply chain? What are the

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Speaker 4: tools that we have and that we can deploy. Some

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Speaker 4: of them are regulatory, that could be procurement, could be

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Speaker 4: multilateral agreements, could be stockpiles. You know, it could be

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Speaker 4: changed to our immigration policy. And then the last question,

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Speaker 4: this is the hardest one, and this is where we

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Speaker 4: really have to build our analytical muscles within the US government,

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Speaker 4: is can we stress test and simulate if we use

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Speaker 4: our tools in the way that's optimal for the United States,

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Speaker 4: and we make assumptions about what our adversaries do, and

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Speaker 4: then also non aligned countries and allies and partners, if

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Speaker 4: we make assumptions about how that plays out over the

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Speaker 4: course of five or ten years, are we net better

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Speaker 4: off in equilibrium? That's the framework that I think we're

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Speaker 4: trying to apply in every supply chain, and every supply

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Speaker 4: chains a different story. I mean, there's some kind of

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Speaker 4: Tolstoy logic behind it. And so pick a supply chain

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Speaker 4: and we can get into the details.

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Speaker 5: I'm really looking forward to getting into details and specific

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Speaker 5: mechanisms and.

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Speaker 3: Tools you have.

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Speaker 5: I just want to you know, when you think about

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Speaker 5: these like long term, we don't make five year plans

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Speaker 5: in the US, in part because we don't know who's

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Speaker 5: going to be in power in a year from now,

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Speaker 5: and there's always changing. How do you think about at

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Speaker 5: the abstract level or the big picture level, how do

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Speaker 5: you think about the challenge of long term planning for

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Speaker 5: some of these areas in a political system that is

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Speaker 5: inherently by design, very volatile.

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Speaker 4: It's very hard. About four decades have passed since we

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Speaker 4: really practiced industrial policy in the United States, and some

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Speaker 4: of those muscles that we used to have they've atrophied.

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Speaker 4: And so that's what I was referencing when I said,

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Speaker 4: we really do need to build an analytical infrastructure that's

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Speaker 4: fit for purpose. Now it may be that the political

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Speaker 4: judgments that are made, even with the best analysis, are

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Speaker 4: going to take us in a very different place than

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Speaker 4: the analysis would suggest we should. But we first have

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Speaker 4: to do our homework. If we have tools that can

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Speaker 4: boost our supply chain resilience, really you can apply the

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Speaker 4: use of tools to any kind of geopolitical objective, not

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Speaker 4: just supply chain resilience. Can we take inventory of all

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Speaker 4: of those tools, When have they worked well when they're

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Speaker 4: used alone or in tandem, when they're used unilaterally versus

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Speaker 4: multilaterally with allies and partners. What are the limitations of

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Speaker 4: using those tools, What are the trade offs? What are

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Speaker 4: the spillovers? And then I don't think we have good

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Speaker 4: models yet for thinking about how we're left in a

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Speaker 4: if you want to think about it in a general

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Speaker 4: equilibrium sense, if we deploy the tools that we have

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Speaker 4: and they play out in the manner that we expect,

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Speaker 4: how do we think about whether we're not better off

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Speaker 4: when we consider how our adversaries might respond, or allies

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Speaker 4: or partners or not aligned countries. Those models don't exist.

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Speaker 4: I mean, I don't think you can use the fed's

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Speaker 4: large scale general equilibrium models to find an answer. We

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Speaker 4: have to invent those. So that's just the analysis part.

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Speaker 4: And I think we have to build, my mind, a

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Speaker 4: multidisciplinary swat team of sorts, with different kinds of expertise

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Speaker 4: and a variety of disciplines I mean microeconomics, macro financial forensics,

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Speaker 4: trade finance, diplomacy, international law, domestic law. And that's going

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Speaker 4: to take time to build. Ultimately, though, I mean, you're

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Speaker 4: asking the question of what happens if you have an

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Speaker 4: abrupt political shift and we no longer stick to the

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Speaker 4: plan that might have been imagined by a previous administration.

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Speaker 4: That is a feature of democracy. You can look at

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Speaker 4: it as a bug because we can't make long term

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Speaker 4: plans in the way that an autocracy can. But it

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Speaker 4: also prevents us from making big mistakes. You could argue,

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Speaker 4: we have these checks and balances and we have to convince.

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Speaker 4: I mean, a lot of the work that I think

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Speaker 4: I do our team performs it should have bipartisan appeal.

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Speaker 4: We think all the time about how do we sustain

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Speaker 4: our technological pre eminence, how do we ensure that we

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Speaker 4: have energy security, how can we shore up our resilience

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Speaker 4: and critical supply chains. I don't think of those as

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Speaker 4: being inherently partisan issues. Of course, they become part of

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Speaker 4: the theater, but in their essence, we're just trying to

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Speaker 4: think about what are the long term strategic objectives of

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Speaker 4: this country, putting aside the politics of the day.

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Speaker 2: Okay, So, in the spirit of moving away from abstraction

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Speaker 2: about you know, catchphrases like supply chain, resilience and things

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Speaker 2: like that, can you maybe give us a specific example

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Speaker 2: of what you've done to shore up a specific thing

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Speaker 2: or even service, walk us through the process of identifying

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Speaker 2: it as something that is worth the government's time and

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Speaker 2: effort to coming up with particular solutions and evaluating those

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Speaker 2: different solutions versus the problem.

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Speaker 4: Yeah. Sure, I mean, I'll give you a recent example

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Speaker 4: from actually from last month. It's the polar Icebreaker deal.

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Speaker 4: So on the sidelines of the NATO summit, the deal

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Speaker 4: was President Biden and his counterparts in Finland and Canada.

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Speaker 4: They announced the deal called the ice Pack, the ice

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Speaker 4: Breaker Collaboration Effort. And here's the backdrop. I mean, the

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Speaker 4: North Pole is warming rapidly. It's warming four times faster

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Speaker 4: than the rest of the world. That means the Arctic

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Speaker 4: ice is melting, and the melting accelerates the warming because

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Speaker 4: the sea absorbs the heat from sunlight, whereas ice reflects it.

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Speaker 4: And less ice means more Arctic shipping lanes that have

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Speaker 4: shorter transits that bypass choke points in the Suez or

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Speaker 4: Panama Canal. And less ice also means more commercial opportunity

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Speaker 4: if you want to extract critical minerals or lay undersea

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Speaker 4: data cables in the Arctic. And then it also creates

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Speaker 4: and this is where my role at the intersection of

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Speaker 4: economics and national security comes in. It creates geopolitical space

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Speaker 4: to project military power, and Russia and China both have

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Speaker 4: high ambitions in the Arctic. With a larger surface fleet

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Speaker 4: that will be able to navigate the Arctic in ways

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Speaker 4: that it couldn't when there was more ice. But for

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Speaker 4: any of those opportunities to be realized, you need ice breakers.

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Speaker 4: We only have two of them. Both of those ice

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Speaker 4: breakers were built in the nineteen seventies. They're both past

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Speaker 4: their service life, and it's taking a long time and

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Speaker 4: a lot of money to replace these ice breakers and

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Speaker 4: build a full US fleet to take advantage of the

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Speaker 4: opportunities I mentioned. So that means we have to rebuild

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Speaker 4: our productive capacity in building this highly specialized, highly complex

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Speaker 4: niche of ships called polar ice breakers. And if you

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Speaker 4: want to do that, you first have to have no

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Speaker 4: how and expertise. You probably need to have economies of

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Speaker 4: scale to make it financially viable, and then you need

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Speaker 4: a steady demand signal to justify the upfront costs and

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Speaker 4: capex and also investments in the workforce. Well, this is

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Speaker 4: where your allies matter. Friends matter. So enter Finland. It's

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Speaker 4: a newly minted NATO ally right. It joined after Russian

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Speaker 4: invaded Ukraine. It's widely recognized as the world's best designer

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Speaker 4: and leading producer of polar ice breakers. You may have

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Speaker 4: heard at some point about the Helsinki Shipyard. It's actually

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Speaker 4: produced more than half of the world's total fleet. Canada

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Speaker 4: is also a leading player, and actually one of its

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Speaker 4: firms bought the Helsinki shipyard after its previous owners, a

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Speaker 4: couple of Russian oligarchs were caught up in sanctions after

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Speaker 4: Putin invaded Ukraine. So this gets really interesting. And the

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Speaker 4: deal we announced at NATO is for Finland and Canada

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Speaker 4: to share their expertise with US and make investments in

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Speaker 4: US shipyards to grow our collective production capacity to build

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Speaker 4: ice breakers. And what do they get. Well, in exchange,

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Speaker 4: we agree to integrate our ice breaking supply chains so

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Speaker 4: that they are interoperable at every stage of production. And

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Speaker 4: then ultimately our vision collectively all three countries, it's to

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Speaker 4: create a suppliers club that can capture a greater share

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Speaker 4: of the global order book. And it's a big global

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Speaker 4: order book. There's a long list of allies and partners

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Speaker 4: that understand what's happening in the Arctic and they want

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Speaker 4: to build ice breakers for the same reasons that we do,

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Speaker 4: but they don't have a shipyard. And our best estimate

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Speaker 4: is that the global total global demand for ice breakers

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Speaker 4: over the next decade from allies and partners is between

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Speaker 4: seventy and ninety vessels. That's a lot. And so if

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Speaker 4: we can pull this off, we get three benefits at once.

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Speaker 4: We revitalize our capacity to innovate and produce at scale

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Speaker 4: in a key industrial segment number one. Number two, we

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Speaker 4: safeguard our national security and project power in a key

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Speaker 4: geostrategic region number two. And then number three, it's not

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Speaker 4: zero sum. You know, we strengthen our allies and partnerships

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Speaker 4: as we execute this deal. That's not a bad trifecta.

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Speaker 5: What happened to you as shipbuilding capacity in general, that

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Speaker 5: it's become so constrained or atrophied. And when you talk

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Speaker 5: about this agreement with Canada and Finland, what kind of

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Speaker 5: numbers and concrete mechanisms are there other than just obviously

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Speaker 5: the handshake or the agreement to do something.

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Speaker 4: Our shipbuilding industry is atropheed. Over the course of decades,

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Speaker 4: we began to outsource, just like in many other industries

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Speaker 4: in which there's a large upfront capex investment required and

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Speaker 4: low margins. We outsourced that type of business overseas. So

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Speaker 4: China became the dominant player in large part because of

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Speaker 4: the degree of subsidies that they deploy to their shipbuilding industry,

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Speaker 4: and Japan and Korea were left as the only other

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Speaker 4: major global players, and that created a major economic and

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Speaker 4: geopolitical vulnerability that has been exposed in recent years. Now

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Speaker 4: we could decide should we compete writ large in shipbuilding.

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Speaker 4: I think we should, but we have to start somewhere.

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Speaker 4: And so what we're doing is picking a niche that

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Speaker 4: plays to our competitive strengths, because, as I mentioned, this

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Speaker 4: is a this is a highly specialized niche, the one

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Speaker 4: that I'm describing with polar ice breakers requires a lot

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Speaker 4: of technology. Finland and Canada are best in class, and

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Speaker 4: if they're willing to partner with us and share with

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Speaker 4: us and rebuilding our productive capacity, that's why this deal

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Speaker 4: makes sense. In terms of the numbers we're actually working

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Speaker 4: on an MoU, I can't give you the exact numbers,

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Speaker 4: but I mean I would go back to the Global

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Speaker 4: order book that I mentioned. There are seventy to ninety

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Speaker 4: ice breakers that the likes of India and Brazil and

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Speaker 4: Argentina and Chile and Sweden many countries one ice breakers.

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Speaker 4: We want to be their supplier of choice. All three

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Speaker 4: of our countries do. And so instead of building two

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Speaker 4: ice breakers in the past fifty years, we want to capture,

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Speaker 4: you know, let's say ten twenty thirty ice breakers of

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Speaker 4: demand over the next decade. And you can only have

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Speaker 4: the kind of investments and workforce development that I'm describing

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Speaker 4: if you have that sort of demand signal.

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Speaker 2: So you mentioned strengthening cooperation with our allies through some

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Speaker 2: of these initiatives, and you know, I take the point

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Speaker 2: when it comes to things like icebreakers, but certainly in

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Speaker 2: some areas where we've identified strategic importance or a particular

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Speaker 2: industry that we do want to build up. I'm thinking

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Speaker 2: specifically about domestic electric vehicle manufacturing, there is sometimes a

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Speaker 2: tension between building up our own domestic capacity and our

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Speaker 2: own independence supply versus the interests of some of our

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Speaker 2: allies and specifically Europe in that case, Can you talk

437
00:24:51,400 --> 00:24:54,760
Speaker 2: a little bit about how you balance those competing interests.

438
00:24:55,480 --> 00:24:57,280
Speaker 4: Yeah, I mean so, I'm glad. I mean EV's that's

439
00:24:57,280 --> 00:25:00,760
Speaker 4: a great example because you could generalize the challenge we're

440
00:25:00,760 --> 00:25:03,840
Speaker 4: facing an EVS to the entire tradable good sector. And

441
00:25:04,280 --> 00:25:07,080
Speaker 4: I mean the problem confronting the world, not just the US,

442
00:25:07,200 --> 00:25:10,840
Speaker 4: is that China's production trajectory it's set to flood the

443
00:25:10,840 --> 00:25:14,479
Speaker 4: world well beyond what global demand can plausibly absorb. And

444
00:25:14,560 --> 00:25:17,040
Speaker 4: it's not a new problem. We've seen China run this

445
00:25:17,119 --> 00:25:19,400
Speaker 4: play for the better part of the last two decades.

446
00:25:19,440 --> 00:25:22,719
Speaker 4: It's how China has gained dominance and steel and solar

447
00:25:22,760 --> 00:25:26,520
Speaker 4: and wind and medical devices, machine tools. But now the

448
00:25:26,560 --> 00:25:30,359
Speaker 4: trend is broadening, it's intensifying, it's moving up the value chain.

449
00:25:30,480 --> 00:25:32,680
Speaker 4: So evs are a good example of how they're doing so,

450
00:25:32,760 --> 00:25:37,040
Speaker 4: but semiconductors or batteries would be other good examples. And

451
00:25:37,240 --> 00:25:40,080
Speaker 4: the starting point is one of the worrisome aspects because

452
00:25:40,160 --> 00:25:44,320
Speaker 4: China already accounts for thirty percent of the world's manufacturing

453
00:25:44,359 --> 00:25:46,879
Speaker 4: sector and value added terms, and that's more than the

454
00:25:47,000 --> 00:25:51,560
Speaker 4: US and Germany, Japan, India, and Mexico combined. And look

455
00:25:51,840 --> 00:25:55,439
Speaker 4: China's dominance, if it's growing dominance of these sectors was

456
00:25:55,520 --> 00:25:59,440
Speaker 4: merely the result of indigenous innovation and market forces, you know,

457
00:25:59,440 --> 00:26:02,800
Speaker 4: we should apply, we should applaud the positive spillovers that

458
00:26:02,920 --> 00:26:05,760
Speaker 4: would accrue to the rest of the world. But The

459
00:26:05,800 --> 00:26:08,920
Speaker 4: reality is that the China is competing with massive state support.

460
00:26:09,119 --> 00:26:13,600
Speaker 4: It's beyond anything we've seen in any other industrialized economy,

461
00:26:14,040 --> 00:26:15,600
Speaker 4: and you can see it. I mean, we could talk

462
00:26:15,600 --> 00:26:18,560
Speaker 4: through the metrics. There are volume based metrics, nominal metrics,

463
00:26:18,960 --> 00:26:22,679
Speaker 4: financial results from its exporters. You could measure the scale

464
00:26:22,720 --> 00:26:25,680
Speaker 4: of policy support directly. You could look at market structure

465
00:26:25,680 --> 00:26:28,680
Speaker 4: and how much it's concentrated. You arrive at the same conclusion.

466
00:26:29,200 --> 00:26:31,000
Speaker 4: And so your question is the right one. How do

467
00:26:31,040 --> 00:26:35,920
Speaker 4: we confront that challenge without alienating allies? And we've tried

468
00:26:35,960 --> 00:26:41,000
Speaker 4: to articulate three levers that we deploy and which lever

469
00:26:41,119 --> 00:26:44,320
Speaker 4: you deployed and to what extent. It's more empirical than ideological.

470
00:26:44,359 --> 00:26:46,439
Speaker 4: But the first lever is, yes, we are going to

471
00:26:46,480 --> 00:26:50,919
Speaker 4: make investments at home to strengthen and scale up our

472
00:26:50,920 --> 00:26:52,760
Speaker 4: productive capacity. I mean much in the way that I

473
00:26:52,800 --> 00:26:55,440
Speaker 4: described for the Icebreaker deal. And that's an R and

474
00:26:55,520 --> 00:26:59,199
Speaker 4: D and infrastructure and technology and manufacturing. It's also the

475
00:26:59,280 --> 00:27:02,560
Speaker 4: size and skills of the labor force that's required to

476
00:27:02,640 --> 00:27:06,240
Speaker 4: build out the capacity that you were trying to generate.

477
00:27:06,920 --> 00:27:10,679
Speaker 4: But the second is partnerships, So partnerships with countries that

478
00:27:10,720 --> 00:27:13,280
Speaker 4: are playing by the same rules to give each other

479
00:27:13,359 --> 00:27:17,720
Speaker 4: access to our productive capacity and our purchasing power. And

480
00:27:17,760 --> 00:27:19,919
Speaker 4: then the third part of it is, and it's regrettable,

481
00:27:20,080 --> 00:27:23,159
Speaker 4: but it's the use of restrictive tools like tariffs with

482
00:27:23,520 --> 00:27:26,119
Speaker 4: on trading partners that are not playing by the same rules.

483
00:27:26,240 --> 00:27:29,520
Speaker 4: And that really is to prevent our investments from getting undercut.

484
00:27:30,080 --> 00:27:32,560
Speaker 4: And I really do wish we didn't have to use tariffs,

485
00:27:32,640 --> 00:27:35,320
Speaker 4: but the reality is that we're not competing by the

486
00:27:35,359 --> 00:27:39,040
Speaker 4: same rules, and the harm from standing aside and doing

487
00:27:39,080 --> 00:27:42,760
Speaker 4: nothing is not acceptable to our economic strategy, or our

488
00:27:42,840 --> 00:27:47,080
Speaker 4: national security, or to our political economy. Now, I mean

489
00:27:47,640 --> 00:27:51,360
Speaker 4: the challenge in terms of keeping our allies and partners

490
00:27:51,359 --> 00:27:54,280
Speaker 4: with us, it's how exactly do you calibrate the use

491
00:27:54,280 --> 00:27:58,040
Speaker 4: of all three of these levers and the optimal scale

492
00:27:58,320 --> 00:28:01,840
Speaker 4: and scope of tariffs. It really depends on the pace

493
00:28:01,880 --> 00:28:05,240
Speaker 4: at which we in our allies are deploying productive capacity

494
00:28:05,960 --> 00:28:08,760
Speaker 4: and the extent to which our investments are getting multiplied

495
00:28:08,800 --> 00:28:13,280
Speaker 4: by the private sector, and how China responds with affirmative

496
00:28:13,320 --> 00:28:16,640
Speaker 4: measures or restrictive measures of its own. So this gets

497
00:28:16,640 --> 00:28:18,199
Speaker 4: back to the point I was making earlier. I mean,

498
00:28:18,240 --> 00:28:20,879
Speaker 4: we want to partner with our allies in terms of

499
00:28:20,920 --> 00:28:25,240
Speaker 4: this analysis of multi stage multiplayer game theory. You know,

500
00:28:25,280 --> 00:28:27,600
Speaker 4: we have choices to make, so does China. So do

501
00:28:27,640 --> 00:28:30,520
Speaker 4: our allies, and so do non aligned countries. So we

502
00:28:30,560 --> 00:28:32,920
Speaker 4: want to we actually want to roll up our sleeves

503
00:28:32,960 --> 00:28:36,800
Speaker 4: with allies, think several steps ahead, anticipate their response from

504
00:28:36,800 --> 00:28:40,400
Speaker 4: other players, and then make x anti judgments about whether

505
00:28:40,440 --> 00:28:44,920
Speaker 4: our interventions, whether they're affirmative inducements in our productive capacity,

506
00:28:44,960 --> 00:28:48,080
Speaker 4: or whether they're tariffs to remedy harm. Are they going

507
00:28:48,120 --> 00:28:50,680
Speaker 4: to make us net better off in equilibrium for decades

508
00:28:50,720 --> 00:28:54,080
Speaker 4: to come collectively, And that's the kind of conversation they welcome.

509
00:28:54,880 --> 00:28:57,720
Speaker 4: And you know, I know we've had endless inkspilled about

510
00:28:57,760 --> 00:29:01,200
Speaker 4: whether allies are alienated by our actions. But I have

511
00:29:01,240 --> 00:29:04,480
Speaker 4: to say the technocratic dialogue that's taking place and really

512
00:29:04,480 --> 00:29:06,200
Speaker 4: it's I mean, I was at the G seven earlier

513
00:29:06,200 --> 00:29:09,000
Speaker 4: this summer as well. The dialogue at the highest levels

514
00:29:09,000 --> 00:29:13,360
Speaker 4: of government it has become. I would say it's remarkably constructive.

515
00:29:13,440 --> 00:29:15,040
Speaker 4: You know, I was away for a year and a half.

516
00:29:15,600 --> 00:29:17,719
Speaker 4: I came back and the tone has really changed.

517
00:29:18,520 --> 00:29:22,960
Speaker 5: You know, another area that we've seen this administration really

518
00:29:23,280 --> 00:29:28,320
Speaker 5: used the idea of economic strains and geopolitical security is

519
00:29:28,360 --> 00:29:31,800
Speaker 5: in the novel use of the Strategic Petroleum Reserve, which

520
00:29:31,880 --> 00:29:35,120
Speaker 5: by its name, you know, people thought of it as like, oh,

521
00:29:35,160 --> 00:29:38,000
Speaker 5: it's just a mechanism in case we were suddenly the

522
00:29:38,080 --> 00:29:40,440
Speaker 5: US is like shut off from being able to import oil,

523
00:29:40,720 --> 00:29:42,960
Speaker 5: which is no longer a big deal anymore because we're

524
00:29:43,000 --> 00:29:45,440
Speaker 5: such a big oil producer, and now it has this

525
00:29:45,520 --> 00:29:48,560
Speaker 5: sort of economic balancing effect. In fact, you wrote a

526
00:29:48,640 --> 00:29:51,200
Speaker 5: piece that got published in the FT in February with

527
00:29:51,440 --> 00:29:54,640
Speaker 5: previous odd Lad's guests are the data about this, But

528
00:29:54,680 --> 00:29:57,920
Speaker 5: then there's talk about, well, can spr like mechanisms be

529
00:29:58,160 --> 00:30:02,920
Speaker 5: used for other strategic commodities such as the various minerals

530
00:30:02,960 --> 00:30:07,120
Speaker 5: that are necessary for say, EV batteries. Except for where

531
00:30:07,200 --> 00:30:09,360
Speaker 5: are we on this? Is this still just in the

532
00:30:09,440 --> 00:30:13,320
Speaker 5: sort of tweets and blogs and white papers world? Or

533
00:30:13,640 --> 00:30:19,080
Speaker 5: is there a trajectory for more spr like infrastructure to

534
00:30:19,120 --> 00:30:25,360
Speaker 5: stabilize a market induce demand for these other critical commodities.

535
00:30:26,000 --> 00:30:27,480
Speaker 4: Well, I mean I no longer live in the world

536
00:30:27,480 --> 00:30:33,640
Speaker 4: of tweets and blogs. Yeah, it can be, but there

537
00:30:33,680 --> 00:30:35,920
Speaker 4: is real work taking place. I mean, for the reasons

538
00:30:35,920 --> 00:30:38,200
Speaker 4: that I wrote about with ARNAB when we created the

539
00:30:38,280 --> 00:30:42,920
Speaker 4: spr we were a major net importer of petroleum and

540
00:30:42,960 --> 00:30:45,560
Speaker 4: we were going through the oil shocks of the nineteen seventies,

541
00:30:45,880 --> 00:30:47,719
Speaker 4: and it made sense, of course to have a very

542
00:30:47,800 --> 00:30:52,320
Speaker 4: large stockpile as a buffer against shocks. Now everyone knows

543
00:30:52,360 --> 00:30:56,000
Speaker 4: we're a net exporter, but we have quite a bit

544
00:30:56,040 --> 00:30:59,360
Speaker 4: of vulnerability on many of the inputs that are needed

545
00:30:59,360 --> 00:31:02,760
Speaker 4: to make clean energy transition, and also for many of

546
00:31:02,760 --> 00:31:06,120
Speaker 4: the refined products that come from petroleum that sometimes become scarce,

547
00:31:06,600 --> 00:31:09,440
Speaker 4: particularly during the winter months. So can we broad in

548
00:31:09,560 --> 00:31:13,160
Speaker 4: the concept of the strategic petroleum reserve to think about

549
00:31:13,640 --> 00:31:16,960
Speaker 4: resilience more generally? And if you want to think about

550
00:31:16,960 --> 00:31:19,680
Speaker 4: critical minerals, the reality is if you look at each

551
00:31:19,720 --> 00:31:23,640
Speaker 4: of the markets and they're really embryonic markets for many

552
00:31:23,680 --> 00:31:26,640
Speaker 4: of the critical minerals that are needed like lithium or nickel,

553
00:31:26,760 --> 00:31:31,200
Speaker 4: or manganese, graphite, et cetera. We are facing serious shortfalls

554
00:31:31,680 --> 00:31:35,280
Speaker 4: and under investments in you supply, and much of the

555
00:31:35,320 --> 00:31:40,120
Speaker 4: investment problem relates to price spikes and just outright volatility

556
00:31:40,560 --> 00:31:42,920
Speaker 4: in these markets. And I don't think the market is

557
00:31:42,960 --> 00:31:46,560
Speaker 4: going to solve this problem by itself, and because the

558
00:31:46,720 --> 00:31:50,360
Speaker 4: risks for producers, they're asymmetric to the downside, it's they

559
00:31:50,440 --> 00:31:53,840
Speaker 4: undersupply a critical mineral. Okay, they may lose a little

560
00:31:53,840 --> 00:31:59,000
Speaker 4: bit of profit. If they oversupply, they are potentially facing insolvency.

561
00:32:00,160 --> 00:32:02,920
Speaker 4: They always of course, there's a sort of damicles hanging

562
00:32:02,920 --> 00:32:05,440
Speaker 4: over all of these markets, which is China flooding the market.

563
00:32:06,080 --> 00:32:08,800
Speaker 4: So there's an opportunity for the public sector to step in,

564
00:32:09,640 --> 00:32:12,440
Speaker 4: and we really with some novel financial tools, can we

565
00:32:12,520 --> 00:32:16,160
Speaker 4: think about an authority that gives us a demand backstop,

566
00:32:16,240 --> 00:32:19,240
Speaker 4: the the ability to create a demand's backstop with price

567
00:32:19,280 --> 00:32:23,160
Speaker 4: floors or guarantees or insurance mechanisms or a buyer of

568
00:32:23,240 --> 00:32:27,040
Speaker 4: last resort function. Could we have the ability to intervene

569
00:32:27,080 --> 00:32:30,440
Speaker 4: in markets to buy when the spot market is depressed

570
00:32:30,680 --> 00:32:33,920
Speaker 4: and then sell the equivalent amount in futures markets, or

571
00:32:33,960 --> 00:32:37,240
Speaker 4: create a synthetic reserve by selling put options without actually

572
00:32:37,240 --> 00:32:41,479
Speaker 4: having to physically stockpile the mineral. If it's feasible, you know,

573
00:32:41,520 --> 00:32:44,320
Speaker 4: if the good allows for it, can we stockpile. Can

574
00:32:44,360 --> 00:32:48,280
Speaker 4: we provide non recourse bridge financing to a liquid but

575
00:32:48,440 --> 00:32:52,720
Speaker 4: solvent producer. Can we create a marketplace for high standard

576
00:32:52,720 --> 00:32:56,160
Speaker 4: critical minerals, the kind of minerals that have high standards

577
00:32:56,200 --> 00:33:00,360
Speaker 4: for labor and environmental impact, or just transparency. These are

578
00:33:00,360 --> 00:33:02,680
Speaker 4: all the kind of authorities that when I talked about

579
00:33:02,720 --> 00:33:06,400
Speaker 4: reinventing or reimagining our tools, these are examples of the

580
00:33:06,480 --> 00:33:08,800
Speaker 4: kind of tools I think we're going to need as

581
00:33:08,840 --> 00:33:11,000
Speaker 4: we undergo this transition over the next few decades.

582
00:33:11,360 --> 00:33:13,880
Speaker 2: So I know you were talking about minerals just then,

583
00:33:14,000 --> 00:33:17,000
Speaker 2: but I have sometimes joked on this podcast that I'm

584
00:33:17,120 --> 00:33:20,760
Speaker 2: going to campaign for a strategic pork reserve. So I

585
00:33:20,800 --> 00:33:24,440
Speaker 2: feel it's incumbent upon me to ask how does food

586
00:33:24,520 --> 00:33:29,200
Speaker 2: security fit into your thinking? And also is there potentially

587
00:33:29,240 --> 00:33:33,880
Speaker 2: an overlap between the Biden administration's stated goal of bringing

588
00:33:33,920 --> 00:33:39,440
Speaker 2: down prices and inflation and also building up independent supply

589
00:33:39,560 --> 00:33:41,120
Speaker 2: and resiliency and things like that.

590
00:33:42,120 --> 00:33:45,040
Speaker 4: Yeah. I mean, look, I no one should laught food

591
00:33:45,080 --> 00:33:47,360
Speaker 4: security as national security. There's no question. We have to

592
00:33:47,400 --> 00:33:50,840
Speaker 4: take it seriously, and sometimes markets for food fail. I

593
00:33:50,920 --> 00:33:53,160
Speaker 4: think there is something to what you're asking. I mean,

594
00:33:53,200 --> 00:33:57,920
Speaker 4: there's another idea that is worth thinking about more, which is,

595
00:33:58,400 --> 00:34:02,080
Speaker 4: you know, should we create a pool of patient capital

596
00:34:02,600 --> 00:34:06,400
Speaker 4: that could be invested with flexibility and at scale to

597
00:34:06,520 --> 00:34:10,200
Speaker 4: advance strategic objectives that the private sector left to itself

598
00:34:10,680 --> 00:34:15,680
Speaker 4: may not prioritize, especially during moments of exigency, and food

599
00:34:15,680 --> 00:34:18,719
Speaker 4: security could be one of those objectives. So, for example,

600
00:34:19,239 --> 00:34:20,880
Speaker 4: and you can call this what you want, but if

601
00:34:20,880 --> 00:34:24,120
Speaker 4: you had a pool of flexible capital, perhaps we could

602
00:34:24,160 --> 00:34:27,759
Speaker 4: give discretion for the US government, with all the appropriate guardrails,

603
00:34:28,320 --> 00:34:32,160
Speaker 4: to make investments at home or abroad to advance strategic

604
00:34:32,160 --> 00:34:36,880
Speaker 4: objectives that Congress or some other form of democratically legitimate

605
00:34:37,719 --> 00:34:41,880
Speaker 4: deliberation decides are worth advancing. It could be energy security,

606
00:34:41,960 --> 00:34:45,600
Speaker 4: could be food security, could be addressing supply chain vulnerabilities.

607
00:34:45,680 --> 00:34:49,200
Speaker 4: It could be sustaining technological pre eminence. That could be

608
00:34:49,239 --> 00:34:52,000
Speaker 4: one purpose of it. A second would be and this

609
00:34:52,080 --> 00:34:55,640
Speaker 4: maybe gets to the more likely use case for food security.

610
00:34:56,320 --> 00:34:59,239
Speaker 4: Could this pool of capital help US respond to or

611
00:34:59,360 --> 00:35:04,800
Speaker 4: deter a disruptive shock, particularly a disruptive shock from economic coercion.

612
00:35:04,880 --> 00:35:08,000
Speaker 4: And this happens all over the world, It's happening right

613
00:35:08,040 --> 00:35:11,359
Speaker 4: now to some extent in the Philippines. And then three,

614
00:35:11,480 --> 00:35:13,960
Speaker 4: could this pool of capital just help address what I

615
00:35:14,000 --> 00:35:16,399
Speaker 4: think goes back to one of your questions from before, Joe,

616
00:35:17,080 --> 00:35:20,360
Speaker 4: a strategic US disadvantage compared to some of our adversaries.

617
00:35:20,400 --> 00:35:23,279
Speaker 4: Who can make very long term strategic investments over the

618
00:35:23,280 --> 00:35:25,960
Speaker 4: course of decades. We don't have anything like that, but

619
00:35:26,000 --> 00:35:28,759
Speaker 4: they have sovereign well funds, many of them do. It

620
00:35:28,800 --> 00:35:31,759
Speaker 4: helps them gain a first mover advantage or just a

621
00:35:31,800 --> 00:35:35,840
Speaker 4: competitive edge in many in many critical supply chains or

622
00:35:35,880 --> 00:35:39,520
Speaker 4: foundational technologies, and it can confer a lot of soft power.

623
00:35:39,600 --> 00:35:41,960
Speaker 4: So should we have something comparable to that. That's another

624
00:35:42,440 --> 00:35:43,800
Speaker 4: you know, if you ask me what's in the R

625
00:35:43,840 --> 00:35:45,960
Speaker 4: and D lab, this is something we're thinking about.

626
00:35:46,200 --> 00:35:48,520
Speaker 5: One of the things we've talked a little bit about

627
00:35:48,920 --> 00:35:53,000
Speaker 5: strategic planning in the area of relationships with our friends

628
00:35:53,120 --> 00:35:56,000
Speaker 5: and allies. But one of the things that people talk

629
00:35:56,040 --> 00:35:59,359
Speaker 5: about is that some of our actions to impair our

630
00:35:59,480 --> 00:36:03,400
Speaker 5: adversary or constrain our adversaries can backfire or not be

631
00:36:03,440 --> 00:36:05,320
Speaker 5: as powerful as we thought. And there's a lot of

632
00:36:05,640 --> 00:36:08,920
Speaker 5: a lot of articles about how the Russian economy, for example,

633
00:36:09,000 --> 00:36:11,440
Speaker 5: is doing much better than people would have expected in

634
00:36:11,480 --> 00:36:16,319
Speaker 5: the spring twenty twenty two after the sanctions were first hit.

635
00:36:16,400 --> 00:36:19,480
Speaker 5: Maybe it's not booming, but it does not seem like

636
00:36:19,520 --> 00:36:22,920
Speaker 5: it's totally crippled. And then in the context of China,

637
00:36:23,000 --> 00:36:27,160
Speaker 5: for example, you talk about tariffs, we've had technology export controls,

638
00:36:27,200 --> 00:36:30,200
Speaker 5: things like that, constraints on what Nvidia can send to

639
00:36:30,239 --> 00:36:33,080
Speaker 5: them and so forth. You hear, well, this is just

640
00:36:33,120 --> 00:36:35,800
Speaker 5: going to prove to be an accelerant for their own

641
00:36:35,920 --> 00:36:38,880
Speaker 5: domestic initiatives, and that it's going to cause they're going

642
00:36:38,960 --> 00:36:40,439
Speaker 5: to do even more and they're going to do better

643
00:36:40,480 --> 00:36:42,600
Speaker 5: et CETA than the otherwise would have been because they're

644
00:36:42,600 --> 00:36:45,560
Speaker 5: gonna have to double down on homegrown technology. Taking that

645
00:36:45,680 --> 00:36:48,359
Speaker 5: latter one, do you buy that premise? Do you think

646
00:36:48,480 --> 00:36:52,160
Speaker 5: that China is making progress faster than it otherwise would

647
00:36:52,200 --> 00:36:55,880
Speaker 5: have because of certain constraints that have been imposed by

648
00:36:56,080 --> 00:36:57,120
Speaker 5: this administration in.

649
00:36:57,080 --> 00:36:57,600
Speaker 3: The last one.

650
00:36:58,400 --> 00:37:01,080
Speaker 4: I mean, Joe, we could spend multiple podcasts on the

651
00:37:01,160 --> 00:37:04,360
Speaker 4: Russia sanctions regime and export controls on China. Let me

652
00:37:04,360 --> 00:37:07,240
Speaker 4: try to, let me try to answer your questions on China.

653
00:37:07,360 --> 00:37:09,960
Speaker 4: So look, no, I do think I do think these

654
00:37:09,960 --> 00:37:13,000
Speaker 4: controls are absolutely necessary. But let me back up a

655
00:37:13,080 --> 00:37:14,920
Speaker 4: little bit just to give you a sense of why

656
00:37:14,960 --> 00:37:17,040
Speaker 4: I believe that. I mean, the first rule is do

657
00:37:17,160 --> 00:37:19,840
Speaker 4: no harm, right, because our capacity to innovate, we know

658
00:37:19,920 --> 00:37:23,319
Speaker 4: it's one of our superpowers, maybe it is the most

659
00:37:23,320 --> 00:37:25,920
Speaker 4: important superpower we have as a country, and we do

660
00:37:26,000 --> 00:37:29,080
Speaker 4: not want to dull the incentives for renovation, neither here

661
00:37:29,400 --> 00:37:32,839
Speaker 4: or anywhere abroad. And we don't want to reduce our

662
00:37:32,880 --> 00:37:36,279
Speaker 4: companies access to foreign markets unless we're confident that there

663
00:37:36,320 --> 00:37:39,920
Speaker 4: is some national security objective that's implicated without controls. But

664
00:37:40,280 --> 00:37:42,240
Speaker 4: here is the reality, and this is why the China

665
00:37:42,239 --> 00:37:46,160
Speaker 4: export controls are absolutely necessary. There are a set of

666
00:37:46,160 --> 00:37:50,719
Speaker 4: technologies that are they're foundational to economic growth, potential and

667
00:37:50,840 --> 00:37:56,839
Speaker 4: national security, AI, quantum semiconductors, biotech, hypersonics. I mean that

668
00:37:56,880 --> 00:37:59,080
Speaker 4: list is going to change over time, and those of

669
00:37:59,160 --> 00:38:00,960
Speaker 4: us in government need to be humble. We're always going

670
00:38:01,040 --> 00:38:02,840
Speaker 4: to be behind the frontiers of the private sector. But

671
00:38:02,920 --> 00:38:05,640
Speaker 4: let's just stipulate there is a list of so called

672
00:38:05,680 --> 00:38:10,600
Speaker 4: foundational technologies that really really matter. Number two military civil fusion.

673
00:38:10,640 --> 00:38:13,160
Speaker 4: In China, it means the CCP doesn't make a distinction

674
00:38:13,280 --> 00:38:17,359
Speaker 4: between its commercial and military sectors. And then three is

675
00:38:17,400 --> 00:38:19,920
Speaker 4: our private sector. The private sector everywhere in the world,

676
00:38:20,000 --> 00:38:23,520
Speaker 4: it does have this overwhelmingly strong incentive to sell cutting

677
00:38:23,560 --> 00:38:27,839
Speaker 4: edge technology to an enormous Chinese market. And so that's

678
00:38:27,880 --> 00:38:31,520
Speaker 4: the problem is that if we had unfettered diffusion of

679
00:38:31,560 --> 00:38:36,320
Speaker 4: our most foundational technological advances that would be tantamount eventually

680
00:38:36,360 --> 00:38:38,600
Speaker 4: to giving up the crown jewels of the American economy.

681
00:38:39,040 --> 00:38:41,640
Speaker 4: And that's why we're pretty emphatic about not letting that happen.

682
00:38:41,840 --> 00:38:45,960
Speaker 4: And export controls are just an acknowledgment of that geopolitical reality.

683
00:38:46,000 --> 00:38:49,680
Speaker 4: They're not an attempt to hold China back. But that's

684
00:38:49,719 --> 00:38:52,400
Speaker 4: why that you've heard my boss Jake Sullivan, one of

685
00:38:52,400 --> 00:38:55,720
Speaker 4: my bosses, talk about the need to be careful and precise,

686
00:38:55,800 --> 00:38:58,040
Speaker 4: the metaphor of a high fence around a small yard.

687
00:38:58,640 --> 00:39:00,880
Speaker 4: And so what does that mean? I mean here again,

688
00:39:00,960 --> 00:39:03,320
Speaker 4: like I can share with you a bit of the thinking,

689
00:39:03,360 --> 00:39:05,880
Speaker 4: the framework. I mean. Number one, it's what are the

690
00:39:05,920 --> 00:39:08,959
Speaker 4: technologies that are likely to be foundational to US national

691
00:39:09,040 --> 00:39:11,759
Speaker 4: security and economic growth potential? So come up with that

692
00:39:11,840 --> 00:39:15,520
Speaker 4: list number two of that of those technologies on the list,

693
00:39:16,160 --> 00:39:18,640
Speaker 4: where do we have the largest lead and therefore, where

694
00:39:18,640 --> 00:39:21,920
Speaker 4: will we most likely see maximal effort by our adversaries

695
00:39:21,920 --> 00:39:25,080
Speaker 4: to close the gap if the diffusion of US technology

696
00:39:25,160 --> 00:39:28,480
Speaker 4: was uncontrolled, And then conversely, where are we behind and

697
00:39:28,560 --> 00:39:31,840
Speaker 4: therefore most vulnerable to foreign controls that might slow or

698
00:39:31,920 --> 00:39:35,680
Speaker 4: impede our own technological development? And then three, we do

699
00:39:35,760 --> 00:39:38,680
Speaker 4: think really hard about whether and to what extent the

700
00:39:38,719 --> 00:39:43,239
Speaker 4: targets of export controls have substitutes for US foundational technology,

701
00:39:43,280 --> 00:39:46,160
Speaker 4: either through indigenous development and there's been a lot of

702
00:39:46,200 --> 00:39:49,600
Speaker 4: pressive course about what China's doing and lagging edge semiconductors

703
00:39:49,600 --> 00:39:51,879
Speaker 4: in this regard, or from third countries. Can they get

704
00:39:51,880 --> 00:39:54,759
Speaker 4: the supply from somewhere else? And then four is can

705
00:39:54,800 --> 00:39:57,360
Speaker 4: you build a coalition how broad and how deep and

706
00:39:57,440 --> 00:40:01,960
Speaker 4: could we plausibly sustain it around any control for foundational technology?

707
00:40:02,480 --> 00:40:04,839
Speaker 4: And the fifth part of having a small yard high

708
00:40:04,840 --> 00:40:08,400
Speaker 4: fence or a strategic anchor is again stress testing and

709
00:40:08,440 --> 00:40:11,640
Speaker 4: simulating if we get into an escalatory tip for tat

710
00:40:11,719 --> 00:40:15,600
Speaker 4: of technology controls with our adversaries, how does it play

711
00:40:15,640 --> 00:40:19,359
Speaker 4: out in a multiplayer, multi stage contest over time? And

712
00:40:19,400 --> 00:40:22,880
Speaker 4: then put a guardwill on ourselves that any imposition of

713
00:40:22,920 --> 00:40:26,800
Speaker 4: control it has to surpass some threshold of efficacy compared

714
00:40:26,800 --> 00:40:29,319
Speaker 4: to the next best alternative. Is it going to make

715
00:40:29,400 --> 00:40:31,960
Speaker 4: us net better off? So this is not like arbitrary

716
00:40:32,000 --> 00:40:36,600
Speaker 4: and reflexive placing of controls on really important technologies for

717
00:40:36,680 --> 00:40:40,440
Speaker 4: really important markets. We are taking this process very seriously.

718
00:40:40,640 --> 00:40:41,920
Speaker 4: I'm trying to give you a bit of a flavor

719
00:40:41,960 --> 00:40:42,200
Speaker 4: for that.

720
00:40:42,880 --> 00:40:46,480
Speaker 2: So Joe brought up the sanctions against Russia, and you

721
00:40:46,520 --> 00:40:49,160
Speaker 2: were a key architect of those, so I feel we

722
00:40:49,200 --> 00:40:51,960
Speaker 2: would be very remiss if we didn't talk about them

723
00:40:52,000 --> 00:40:55,000
Speaker 2: a little bit more. But one of the criticisms that

724
00:40:55,040 --> 00:40:58,879
Speaker 2: you sometimes see of those is a the efficacy, which

725
00:40:58,960 --> 00:41:03,240
Speaker 2: Joe already alluded to, but be this idea of weaponizing

726
00:41:03,280 --> 00:41:07,480
Speaker 2: the dollar's special status in the global financial system, the

727
00:41:07,600 --> 00:41:10,400
Speaker 2: reserve status. So a lot of what we've been able

728
00:41:10,440 --> 00:41:13,759
Speaker 2: to do is because the US dollar is central in

729
00:41:13,800 --> 00:41:16,000
Speaker 2: the financial system and there are a lot of flows

730
00:41:16,400 --> 00:41:20,000
Speaker 2: that go into dollar assets and things like that. So

731
00:41:20,360 --> 00:41:24,320
Speaker 2: as a result, we have seen more concern about potentially

732
00:41:24,680 --> 00:41:28,320
Speaker 2: countries like Russia and China maybe moving away from the dollar,

733
00:41:28,440 --> 00:41:32,759
Speaker 2: maybe moving into gold or the un or whatever. Is

734
00:41:32,760 --> 00:41:37,239
Speaker 2: that something that you are actively concerned about, And then

735
00:41:37,520 --> 00:41:41,200
Speaker 2: how do you balance the I guess the power that

736
00:41:41,239 --> 00:41:46,440
Speaker 2: the dollar's special status gives the US with maintaining that

737
00:41:46,560 --> 00:41:50,719
Speaker 2: special status and not I guess overreaching in terms of weaponization.

738
00:41:51,680 --> 00:41:53,720
Speaker 4: So I'm going to be a little careful about speaking

739
00:41:53,760 --> 00:41:56,040
Speaker 4: on the dollar. That's uh, there's some kind of lightning

740
00:41:56,080 --> 00:41:57,960
Speaker 4: bolt that will strike me down, because that's really the

741
00:41:58,040 --> 00:42:00,319
Speaker 4: preserve of the Treasury secretary to talk about. But I'll

742
00:42:00,320 --> 00:42:02,000
Speaker 4: just what I'll do is I'll talk to you about

743
00:42:02,000 --> 00:42:04,920
Speaker 4: it in the context of my job. And you're right,

744
00:42:05,000 --> 00:42:08,640
Speaker 4: I mean dollar primacy. It's a privilege. Perhaps it's exorbitant

745
00:42:08,760 --> 00:42:12,040
Speaker 4: that and it allows us to fund our government, our households,

746
00:42:12,040 --> 00:42:15,160
Speaker 4: are businesses much more cheaply than would otherwise be the case.

747
00:42:15,320 --> 00:42:18,120
Speaker 4: It allows us to absorb a shock like no other country.

748
00:42:18,600 --> 00:42:22,120
Speaker 4: And yeah, with sanctions and other forms of economic statecraft,

749
00:42:22,160 --> 00:42:25,600
Speaker 4: that does give us a unique capacity to deliver a shock.

750
00:42:26,280 --> 00:42:29,200
Speaker 4: And every time you use sanctions, especially when you do

751
00:42:29,280 --> 00:42:33,080
Speaker 4: so forcefully, you do create an incentive for some countries

752
00:42:33,160 --> 00:42:36,480
Speaker 4: to hedge against the dollar based financial system. And we've

753
00:42:36,520 --> 00:42:39,080
Speaker 4: got to take that very seriously. But look, you also

754
00:42:39,160 --> 00:42:41,480
Speaker 4: have to, I think step back and look at the

755
00:42:41,560 --> 00:42:45,200
Speaker 4: numbers right now. If you think about the measure of primacy,

756
00:42:45,280 --> 00:42:47,759
Speaker 4: is the currency used, how is it used to save

757
00:42:48,360 --> 00:42:51,680
Speaker 4: to borrow in the transact? Right now, the dollars global

758
00:42:51,719 --> 00:42:54,880
Speaker 4: shares on the order of sixty, sixty and forty percent

759
00:42:54,960 --> 00:42:57,560
Speaker 4: on those measures. The rem and be share is somewhere

760
00:42:57,560 --> 00:43:00,560
Speaker 4: between zero and two percent, and euro is in a

761
00:43:00,600 --> 00:43:03,800
Speaker 4: distant second place. Somewhere around twenty twenty and maybe thirty

762
00:43:03,840 --> 00:43:07,000
Speaker 4: five percent on those measures, And so the dollar still

763
00:43:07,040 --> 00:43:10,280
Speaker 4: is the operating system of global finance. It has incredibly

764
00:43:10,320 --> 00:43:13,960
Speaker 4: powerful network effects. And my view is that displacing the

765
00:43:14,000 --> 00:43:17,319
Speaker 4: dollar would essentially require us to commit a series of

766
00:43:17,400 --> 00:43:19,920
Speaker 4: unforced errors that you would think of as a failure

767
00:43:19,920 --> 00:43:22,439
Speaker 4: from within. And I think that kind of failure would

768
00:43:22,440 --> 00:43:25,400
Speaker 4: also have to be coupled with a more credible alternative

769
00:43:25,719 --> 00:43:28,000
Speaker 4: to have sustained impact. And that is somewhat hard for

770
00:43:28,000 --> 00:43:31,640
Speaker 4: me to see with Europe still challenged by internal divisions,

771
00:43:31,719 --> 00:43:35,480
Speaker 4: Japan trying to break out of multi decade stagnation, and

772
00:43:35,560 --> 00:43:38,240
Speaker 4: China just obviously moving in the wrong direction in terms

773
00:43:38,280 --> 00:43:42,320
Speaker 4: of institutional reforms. But look, I mean, as I mentioned

774
00:43:42,360 --> 00:43:46,120
Speaker 4: dollar primacy, it's a network. All networks have tipping points.

775
00:43:46,719 --> 00:43:49,759
Speaker 4: Those tipping points are often psychological ones that are really

776
00:43:49,760 --> 00:43:52,040
Speaker 4: hard to identify in advance, and we know from the

777
00:43:52,040 --> 00:43:55,359
Speaker 4: study of networks. Anybody knows doesn't matter whether you're talking

778
00:43:55,360 --> 00:44:00,440
Speaker 4: about biology or technology or finance, or like my daughter's

779
00:44:01,040 --> 00:44:04,320
Speaker 4: lunch table at school, they lose value slowly, then very suddenly.

780
00:44:04,840 --> 00:44:07,360
Speaker 4: So we're always going to be paranoid about dollar privacy,

781
00:44:07,400 --> 00:44:09,600
Speaker 4: will never take it for granted. We'll always try to

782
00:44:09,640 --> 00:44:12,680
Speaker 4: build a better product. And so it really depends on

783
00:44:12,680 --> 00:44:14,880
Speaker 4: our policy choices what kind of country you want to be.

784
00:44:15,600 --> 00:44:18,239
Speaker 4: We need to put to rest questions about whether the

785
00:44:18,320 --> 00:44:22,160
Speaker 4: dollar's institutional strengths are going to be sustained across political cycles,

786
00:44:22,719 --> 00:44:26,520
Speaker 4: rule of law, transparent regulation, independent judiciary, deep in liquid

787
00:44:26,520 --> 00:44:30,239
Speaker 4: capital markets. And the most important from my perspective, is

788
00:44:30,280 --> 00:44:34,160
Speaker 4: our story. Our ability to generate trust and to attract

789
00:44:34,200 --> 00:44:37,720
Speaker 4: ideas and talent and investment. That's really ours to lose.

790
00:44:38,440 --> 00:44:40,239
Speaker 5: You know, when I look at the big picture and

791
00:44:40,280 --> 00:44:44,080
Speaker 5: I get excited about reindustrialization efforts and the new factories

792
00:44:44,120 --> 00:44:46,160
Speaker 5: and all seem very cool. But the other thing that

793
00:44:46,239 --> 00:44:49,400
Speaker 5: worries me, or one of the things that really worries me,

794
00:44:50,200 --> 00:44:55,120
Speaker 5: is that the legacy industrial powerhouses of the United States

795
00:44:55,600 --> 00:44:58,000
Speaker 5: seem to really be struggling. And I'm thinking of Going

796
00:44:58,080 --> 00:45:01,479
Speaker 5: in particular, and I'm thinking of tell in particular, which

797
00:45:01,520 --> 00:45:03,480
Speaker 5: is like, Okay, it's great if we have new things,

798
00:45:03,520 --> 00:45:06,080
Speaker 5: but these are like our powerhouses, and they're not doing

799
00:45:06,120 --> 00:45:08,080
Speaker 5: well on a raft of measures.

800
00:45:08,600 --> 00:45:09,680
Speaker 3: What's going on there?

801
00:45:09,719 --> 00:45:12,480
Speaker 5: Like people have different Oh is the financial people they

802
00:45:12,520 --> 00:45:15,360
Speaker 5: got too focused on financials. They're different stories that people

803
00:45:15,440 --> 00:45:20,440
Speaker 5: tell about what happens to legacy domestic industrial capacity. But

804
00:45:20,480 --> 00:45:23,120
Speaker 5: I'm curious what you how you sort of think about

805
00:45:23,480 --> 00:45:27,880
Speaker 5: identifying the problems that we've seen at some of these companies.

806
00:45:28,280 --> 00:45:30,880
Speaker 4: Well, Joe, I'm not going to speak about a particular company,

807
00:45:31,120 --> 00:45:32,759
Speaker 4: but let me try to answer your question more generally,

808
00:45:32,760 --> 00:45:34,799
Speaker 4: because I think it's a really good one. Let me

809
00:45:34,840 --> 00:45:38,640
Speaker 4: pick like a legacy, legacy sector that really matters for

810
00:45:38,800 --> 00:45:42,239
Speaker 4: our national security. And so I don't know if you've

811
00:45:42,239 --> 00:45:45,000
Speaker 4: heard about ship to shore cranes or if you know

812
00:45:45,080 --> 00:45:47,839
Speaker 4: much about them, but it is what it sounds like.

813
00:45:48,120 --> 00:45:51,040
Speaker 4: These are cranes that take a good from a ship

814
00:45:51,239 --> 00:45:53,640
Speaker 4: they bring it to shore. It may not sound like it,

815
00:45:53,680 --> 00:45:56,759
Speaker 4: but this is a critical piece of legacy, you may

816
00:45:56,760 --> 00:46:02,520
Speaker 4: call it legacy legacy, relatively lower tech infrastructure that really matters.

817
00:46:02,600 --> 00:46:05,840
Speaker 4: And it has a real vulnerability because the vast majority

818
00:46:05,880 --> 00:46:09,359
Speaker 4: of the goods that enter or exit our economy they're

819
00:46:09,360 --> 00:46:12,280
Speaker 4: shipped to ports and they're pulled off of ships with cranes.

820
00:46:13,080 --> 00:46:16,880
Speaker 4: Here's the digital aspect of it. These cranes have onboard

821
00:46:16,880 --> 00:46:21,000
Speaker 4: electronics that allow for remote software updates, and they can

822
00:46:21,080 --> 00:46:24,080
Speaker 4: allow a foreign actor to interfere with port operations during

823
00:46:24,080 --> 00:46:27,399
Speaker 4: a crisis, maybe even shut it down. Well, China makes

824
00:46:27,400 --> 00:46:29,520
Speaker 4: eighty percent of these cranes that are used in the US.

825
00:46:30,120 --> 00:46:33,400
Speaker 4: It's priced out the competition with massive subsidies to a

826
00:46:33,440 --> 00:46:38,479
Speaker 4: state owned crane producer called ZPMC. So that gives China

827
00:46:38,800 --> 00:46:42,600
Speaker 4: tremendous opportunity to collect information on what's coming in or

828
00:46:42,640 --> 00:46:46,280
Speaker 4: out of the country, including for goods that supply our military.

829
00:46:46,440 --> 00:46:50,120
Speaker 4: So the risk of another Huawei situation, it's non trivial.

830
00:46:50,800 --> 00:46:54,719
Speaker 4: And so I'm mentioning this because what to do about it.

831
00:46:54,719 --> 00:46:57,600
Speaker 4: It's similar for many other industries that you could reference,

832
00:46:57,640 --> 00:47:00,680
Speaker 4: many companies that you could reference. It has to start

833
00:47:00,719 --> 00:47:04,480
Speaker 4: with public investment to catalyze, ideally through the private sector,

834
00:47:04,880 --> 00:47:08,320
Speaker 4: the rebuilding of our production capacity so on ship to

835
00:47:08,360 --> 00:47:11,719
Speaker 4: shore cranes. Last month, this administration announced it was going

836
00:47:11,800 --> 00:47:14,919
Speaker 4: to take twenty billion dollars from the bipartisan Infrastructure bill

837
00:47:15,840 --> 00:47:19,080
Speaker 4: and start building cranes again because of the national security

838
00:47:19,080 --> 00:47:21,920
Speaker 4: threat that it poses. But then the second piece of it,

839
00:47:21,960 --> 00:47:23,960
Speaker 4: and it relates to a lot of the questions you've asked,

840
00:47:24,040 --> 00:47:26,720
Speaker 4: you need friends to do this the right way. Friends

841
00:47:26,760 --> 00:47:31,319
Speaker 4: with expertise in building cranes in this case, and here

842
00:47:31,480 --> 00:47:34,320
Speaker 4: Japan is one such friend. I mean the twenty billion

843
00:47:34,360 --> 00:47:37,520
Speaker 4: dollars that I referenced, a good part of it is

844
00:47:37,520 --> 00:47:40,120
Speaker 4: going to go to a US subsidiary of Mitsui, a

845
00:47:40,200 --> 00:47:43,719
Speaker 4: Japanese company, and they're now going to build the first

846
00:47:43,760 --> 00:47:46,239
Speaker 4: domestic option for ports on ship to shore cranes in

847
00:47:46,280 --> 00:47:49,680
Speaker 4: thirty years. And hopefully we'll give this firm a chance

848
00:47:49,719 --> 00:47:53,040
Speaker 4: to scale up and compete with a heavily subsidized Chinese rival.

849
00:47:53,200 --> 00:47:55,680
Speaker 4: But to give that a better chance, the President did

850
00:47:55,880 --> 00:47:59,800
Speaker 4: propose twenty five percent tariffs on Chinese ship to shore cranes.

851
00:48:00,400 --> 00:48:02,279
Speaker 4: And the last bit is the Coastguard is going to

852
00:48:02,400 --> 00:48:05,320
Speaker 4: in the meantime it has been given authority to inspect

853
00:48:05,840 --> 00:48:08,200
Speaker 4: all cranes for any signs of hackers that are burrowing

854
00:48:08,200 --> 00:48:11,480
Speaker 4: into the software violating security protocols. So in any of

855
00:48:11,480 --> 00:48:13,279
Speaker 4: these industries, Joe, I mean, this is going to be

856
00:48:13,280 --> 00:48:16,840
Speaker 4: a painstaking process. It's going to require years of effort

857
00:48:16,920 --> 00:48:20,920
Speaker 4: to do the basically the economic forensics of where do

858
00:48:20,960 --> 00:48:23,239
Speaker 4: we have vulnerabilities to what extent is it critical for

859
00:48:23,239 --> 00:48:26,680
Speaker 4: our industrial base, does it have a nexus with national security,

860
00:48:27,080 --> 00:48:30,880
Speaker 4: and what combination of investments and diplomatic agreements and in

861
00:48:30,920 --> 00:48:34,120
Speaker 4: some cases restrictive measures can give us a chance to

862
00:48:34,160 --> 00:48:37,759
Speaker 4: compete in a much more contested environment. I mean, this

863
00:48:37,800 --> 00:48:40,759
Speaker 4: is not las a fair free market economics. You know,

864
00:48:40,800 --> 00:48:43,279
Speaker 4: I came of age in the nineteen nineties and we're

865
00:48:43,320 --> 00:48:46,000
Speaker 4: just not in that world anymore. So this is what

866
00:48:46,040 --> 00:48:47,480
Speaker 4: industrial policy is going to look like.

867
00:48:48,360 --> 00:48:51,040
Speaker 2: Tilly, I'm going to squeeze in one more question, which

868
00:48:51,080 --> 00:48:54,440
Speaker 2: is just going back to that idea of patient capital.

869
00:48:54,640 --> 00:48:58,560
Speaker 2: So number one, how serious are those discussions or how

870
00:48:58,600 --> 00:49:01,960
Speaker 2: serious is that idea being taken? And then secondly, in

871
00:49:02,000 --> 00:49:05,839
Speaker 2: the realms of it building out industrial policy or capacity,

872
00:49:06,000 --> 00:49:09,239
Speaker 2: one of the discussion points that you sometimes hear is

873
00:49:09,400 --> 00:49:13,239
Speaker 2: whether or not it's more valuable to throw money at

874
00:49:13,239 --> 00:49:17,160
Speaker 2: the initial investment, so building the first factory or whatever,

875
00:49:17,760 --> 00:49:21,520
Speaker 2: versus the government committing itself in one way or another

876
00:49:21,640 --> 00:49:25,520
Speaker 2: to longer term forward purchasing agreements so that there's always

877
00:49:25,520 --> 00:49:28,879
Speaker 2: a flow on demand and companies can kind of plan

878
00:49:29,120 --> 00:49:33,680
Speaker 2: accordingly and maybe avoid big cycles where demand is like

879
00:49:33,800 --> 00:49:37,320
Speaker 2: vacillating up and down very dramatically. How are you thinking

880
00:49:37,400 --> 00:49:37,959
Speaker 2: about that?

881
00:49:38,920 --> 00:49:42,480
Speaker 4: Yeah, I don't want to put odds on whether the

882
00:49:42,560 --> 00:49:44,520
Speaker 4: kind of work I was describing is going to end

883
00:49:44,600 --> 00:49:48,320
Speaker 4: up with a particular final form. Just I'm always wrong,

884
00:49:48,840 --> 00:49:51,280
Speaker 4: but let me just try to try to answer your question.

885
00:49:51,360 --> 00:49:54,040
Speaker 4: I mean, I think what we're going to do if

886
00:49:54,080 --> 00:49:57,920
Speaker 4: we have time and political spaces to continue to identify

887
00:49:58,760 --> 00:50:01,320
Speaker 4: sectors that we think are going to be foundational to

888
00:50:01,400 --> 00:50:04,759
Speaker 4: economic growth and essential for national security, and where the

889
00:50:04,800 --> 00:50:08,520
Speaker 4: private sector on its own likely doesn't have the incentives

890
00:50:08,560 --> 00:50:11,040
Speaker 4: to make the investments we need at tas and with

891
00:50:11,200 --> 00:50:15,320
Speaker 4: scale to compete. And that really is all about identifying

892
00:50:15,360 --> 00:50:18,399
Speaker 4: where they're clear market failures. It could be an infrastructure,

893
00:50:18,440 --> 00:50:20,839
Speaker 4: it could be in particular sectors, it could be in

894
00:50:20,880 --> 00:50:23,680
Speaker 4: the size and skills of our labor force. But we

895
00:50:23,800 --> 00:50:26,640
Speaker 4: do know if we don't, if we don't prioritize growth

896
00:50:26,640 --> 00:50:29,200
Speaker 4: in these strategic sectors and make sure that we have

897
00:50:29,320 --> 00:50:32,439
Speaker 4: enough investment and we have enough diplomatic partnerships to help

898
00:50:32,480 --> 00:50:35,080
Speaker 4: them scale, then we're probably going to have a continued

899
00:50:35,080 --> 00:50:37,800
Speaker 4: hollowing out of our industrial base, and we're going to

900
00:50:37,800 --> 00:50:41,759
Speaker 4: be vulnerable to shocks all manner of shocks, and we're

901
00:50:41,760 --> 00:50:44,160
Speaker 4: probably going to have a political economy that becomes more

902
00:50:44,200 --> 00:50:47,600
Speaker 4: and more disillusioned and we'll have a feeling that they've

903
00:50:47,600 --> 00:50:49,560
Speaker 4: been left behind, and that leads us to a very

904
00:50:49,600 --> 00:50:50,160
Speaker 4: bad place.

905
00:50:50,640 --> 00:50:55,239
Speaker 2: De leep saying Deputy National Security Advisor for International Economics

906
00:50:55,600 --> 00:50:58,160
Speaker 2: at the Biden administration, thank you so much for coming

907
00:50:58,160 --> 00:51:00,799
Speaker 2: on all thoughts, really appreciating it's fantastic.

908
00:51:00,880 --> 00:51:02,839
Speaker 3: Thank you so much, So great to get to chat

909
00:51:02,880 --> 00:51:03,160
Speaker 3: with you.

910
00:51:03,320 --> 00:51:17,000
Speaker 4: But really my pleasure, Joe.

911
00:51:17,080 --> 00:51:19,919
Speaker 2: I thought that was very interesting. It also felt nice

912
00:51:20,000 --> 00:51:23,960
Speaker 2: just to talk about supply chains rather than market volatility

913
00:51:24,040 --> 00:51:27,160
Speaker 2: for a little bit. I thought you raise a crucial

914
00:51:27,280 --> 00:51:31,440
Speaker 2: point in the industrial capacity build out, which is in

915
00:51:31,480 --> 00:51:35,560
Speaker 2: some respects the US government is at a disadvantage because

916
00:51:35,600 --> 00:51:39,720
Speaker 2: every four years we have the possibility of major political change,

917
00:51:40,320 --> 00:51:43,440
Speaker 2: and if we're thinking on longer term time scales, you know,

918
00:51:43,560 --> 00:51:47,680
Speaker 2: things like semiconductors take years, if not decades to actually

919
00:51:47,719 --> 00:51:54,120
Speaker 2: build out that capacity, it can be difficult to maintain continuity. Obviously,

920
00:51:54,360 --> 00:51:57,000
Speaker 2: we're in an election year. We don't know who's going

921
00:51:57,040 --> 00:52:00,240
Speaker 2: to be president just yet, but it will be really

922
00:52:00,400 --> 00:52:03,479
Speaker 2: interesting to see in twenty twenty five, like how much

923
00:52:03,520 --> 00:52:04,920
Speaker 2: of this has continued.

924
00:52:05,239 --> 00:52:09,319
Speaker 5: Yeah, you know, I think to Delete's point, look, we

925
00:52:09,360 --> 00:52:12,799
Speaker 5: don't want to be an authoritarian system now, democracy is good,

926
00:52:13,120 --> 00:52:15,000
Speaker 5: and as you put it, that's a feature in a bug.

927
00:52:15,040 --> 00:52:17,799
Speaker 5: It's annoying because it does make long term planning in

928
00:52:17,920 --> 00:52:21,280
Speaker 5: theory more difficult, but it's good because it also provides

929
00:52:21,360 --> 00:52:25,400
Speaker 5: a very important check on long term strategic mistakes in theory,

930
00:52:25,640 --> 00:52:29,000
Speaker 5: and so that's all good. I think where it's worriesome

931
00:52:29,120 --> 00:52:35,200
Speaker 5: specifically is that if you have priorities that shouldn't necessarily

932
00:52:35,239 --> 00:52:42,200
Speaker 5: be particularly controversial, such as say I have icebreakers, right,

933
00:52:42,680 --> 00:52:45,160
Speaker 5: but if you have a political system that's sort of

934
00:52:45,239 --> 00:52:50,240
Speaker 5: like so like polarized and perverted, that everything automatically becomes

935
00:52:50,280 --> 00:52:55,080
Speaker 5: in this hyperpartisan lens. You can see then how any

936
00:52:55,120 --> 00:52:58,920
Speaker 5: sort of priority becomes very difficult to execute on because

937
00:52:58,960 --> 00:53:02,600
Speaker 5: as he said, people will see Zono politically one way

938
00:53:02,760 --> 00:53:06,439
Speaker 5: or another, even if in theory it shouldn't be well.

939
00:53:06,480 --> 00:53:09,000
Speaker 2: And also, the thing I was thinking about was something

940
00:53:09,040 --> 00:53:14,480
Speaker 2: like Icebreakers was done in coordination with Finland and other countries,

941
00:53:14,600 --> 00:53:18,320
Speaker 2: as Deleepe was talking about. But that's an interesting aspect

942
00:53:18,360 --> 00:53:22,080
Speaker 2: where supply chains are becoming more of a coordinated thing.

943
00:53:23,040 --> 00:53:25,720
Speaker 2: I think that's relatively new, at least in the West.

944
00:53:26,239 --> 00:53:32,080
Speaker 2: But how does that continuity risk play out with allies?

945
00:53:32,200 --> 00:53:34,440
Speaker 2: Is there a concern that if they commit to a

946
00:53:34,480 --> 00:53:38,040
Speaker 2: specific thing, then maybe in four years or in a

947
00:53:38,160 --> 00:53:42,280
Speaker 2: year or whatever, the political circumstances will change and US

948
00:53:42,280 --> 00:53:44,480
Speaker 2: interest won't be there in the way it was previously.

949
00:53:45,120 --> 00:53:46,640
Speaker 3: I think we just got to build more ships.

950
00:53:46,800 --> 00:53:49,520
Speaker 5: I mean just I'm gonna say an opinion, like, it

951
00:53:49,560 --> 00:53:52,719
Speaker 5: does not seem great that we've let our sort of

952
00:53:52,760 --> 00:53:56,080
Speaker 5: shipbuilding capacity because it's obviously not just icebreakers. It's been

953
00:53:56,080 --> 00:53:58,480
Speaker 5: a long time since we built like aircraft carriers and

954
00:53:58,560 --> 00:53:59,399
Speaker 5: dredging and all that stuff.

955
00:53:59,400 --> 00:54:01,040
Speaker 3: You gota bid ships in this country.

956
00:54:01,080 --> 00:54:04,520
Speaker 2: We came so close to making this a nineteen oh

957
00:54:04,560 --> 00:54:07,839
Speaker 2: six foreign dredging episode, but we didn't quite get there.

958
00:54:07,880 --> 00:54:09,959
Speaker 3: At one time, the jones didn't come up easier.

959
00:54:10,000 --> 00:54:12,400
Speaker 2: Oh yeah, that's right. Okay, shall we leave it there.

960
00:54:12,520 --> 00:54:13,239
Speaker 3: Let's leave it there.

961
00:54:13,360 --> 00:54:16,439
Speaker 2: This has been another episode of the Authlots podcast. I'm

962
00:54:16,480 --> 00:54:19,680
Speaker 2: Tracy Alloway. You can follow me at Tracy Alloway.

963
00:54:19,400 --> 00:54:22,239
Speaker 5: And I'm Jill Wisenthal. You can follow me at the Stalwart.

964
00:54:22,440 --> 00:54:25,920
Speaker 5: Follow our producers Carmen Rodriguez at Carman armand Deesh, I'll

965
00:54:25,920 --> 00:54:29,440
Speaker 5: Bennett at Dashbot and kill Brooks at Kilbrooks. Thank you

966
00:54:29,480 --> 00:54:32,680
Speaker 5: to our producer Moses on them. For more Oddlogs content,

967
00:54:32,719 --> 00:54:35,080
Speaker 5: go to Bloomberg dot com slash odd Lots, where we

968
00:54:35,120 --> 00:54:37,799
Speaker 5: have transcripts, a blog, and a newsletter and you can

969
00:54:37,880 --> 00:54:41,400
Speaker 5: chat about all of these topics with fellow supply Chain

970
00:54:41,520 --> 00:54:45,479
Speaker 5: nerds in our discord Discord dot gg slash odlogs And.

971
00:54:45,400 --> 00:54:48,799
Speaker 2: If you enjoy Oddlots, if you like these supply Chain episodes,

972
00:54:48,840 --> 00:54:51,600
Speaker 2: then please leave us a positive review on your favorite

973
00:54:51,640 --> 00:54:55,440
Speaker 2: podcast platform. And remember, if you are a Bloomberg subscriber,

974
00:54:55,520 --> 00:54:58,880
Speaker 2: you can listen to all of our episodes absolutely ad free.

975
00:54:59,080 --> 00:55:01,360
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976
00:55:01,520 --> 00:55:04,600
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977
00:55:04,640 --> 00:55:08,439
Speaker 2: the Bloomberg channel on Apple Podcasts and follow the instructions there.

978
00:55:08,920 --> 00:55:09,800
Speaker 2: Thanks for listening.