♪ announcer: from our studios in new york city, this is "charlie rose." charlie: we begin with developments in donald trump's order to build a wall between the united states and mexico. the mexican president canceled a meeting after one day after outrage at the decision. aftercision comes one day aump's decision to build border wall. trump said at a news conference

that it is the united states being treated unfairly. pres. trump: the president of mexico and myself have agreed to cancel our planned meeting scheduled for next week, unless mexico is going to treat the united states fairly, with respect. such a meeting would be fruitless, and i want to go a different route. we have no choice. charlie: trump has also insisted that mexico would fund the wall's construction. plans were announced today to impose a 20% tax on all imports into the united states from mexico to cover the cost of the new barrier. joining me the former u.s. ambassador to mexico. i am pleased to have them both here. phil, tell me exactly what trump thinks he can accomplish now with this decision to end the meeting. negotiations are over and he decides he's going to go another course, which is to impose a 20% tariff. which then i assume mexico will retaliate by imposing a tariff of their own. >> i don't see how and where this ends, but listen, trump was

pretty outraged by the mexican president's response last night when nieto said no way will mexico pay for this border wall, but trump has promised the american people that mexico will pay for the border wall. it was the rallying cry at his campaign rallies all year. so trump now is looking for a way to fund the wall. he is going to have u.s. taxpayers through the congress fund the wall and try to get reimbursement from mexico. what sean spicer floated today was a 20% tax on imports from mexico. they think that would raise the billions of dollars necessary to fund the wall. charlie: what is that number? $10 million, $12 billion, or $14 billion? >> i am not sure the exact number, or if there is a clear estimate of it yet. but it's a pretty provocative move from the white house to try to tax goods from mexico. you have to imagine that that will trickle down to u.s. consumers.

i mean, people buy products from xico, including some of the foods we eat like avocados, so there is a real concern among republicans that this will have a negative impact with consumers in the united states. charlie: at the same time, if mexico imposes tariffs on american goods, that may lead to -- impede them being sold to mexico and create job losses in the united states. it is argued. >> that's exactly right. one of the things i think trump might be missing here is that mexico is one of the most important trade partners of the united states and has been for years. this is not some poor, desolate country. there is a lot of vibrant industry there. there is a lot of commerce across the border between u.s. and mexico. the relationship with mexico is of huge concern to the u.s. business community, the chamber of commerce, and major corporations in the united states rely on trade with mexico. he is really rattling things here, and i'm not sure how this is going to even out. charlie: carlos, give us the response in mexico. how do they feel about it, and

how does this sit with them other than they are not going to pay for the wall, in their own words? carlos: the mexican people are deeply offended by how this has proceeded. during the campaign, donald trump characterized mexicans as criminals and in some cases rapists. therefore, there was a necessity separate wall to mexico and the united states. when you put it in that context, you can understand why mexicans were offended to ask to pay for the wall. when trump said the only way we can have this meeting is if you agree to pay for the wall, it became politically impossible for him to go forward. in effect, what both want -- what both sides have done is drawn a line in the sand, a bad move to make for countries that are physically next to each other really -- and really indivisible as a unit. charlie: what will happen if there is a 20% tariff and a countervailing tariff by mexico

on that? >> this could be a debate about who really pays the tariff. in the united states, if you put a 20% tax on gasoline, you would be hard-pressed to tell a consumer they were not paying a 20% tax on gasoline. in the end, this is going to be borne by american consumers and industries who use the mexican economy and their development and finalize products in the united states. it's going to make products less competitive and have an effect on american jobs and american consumers. inevitably, there is going to be a debate of rhetoric about what a 20% tariff means. who is paying for it, really? is it the country exporting or the consumers in the other country? charlie: phil, will trump be able to argue it's enough money to build the wall and shut up? >> he might be able to, and i don't know if his supporters will want to hear that. the tariff will trickle down to consumers here and have other ramifications.

thean, it will complicate trade relationship at a lot of u.s. companies have an mexico. charlie: carlos, how popular the mexican president with his own people? >> he is having a lot of difficulty. as a result of corruption issues, his popularity has gone very low. this is a difficult time for him to deal with these challenges. one of the big things that will be important to him is to demonstrate to the mexican people that he is standing up for them and their rights. the other issue will be how to convince the united states that this bilateral relationship is good for the u.s. one of the things that struck me during my time as ambassador is that industry after industry, american industry, said if it had not been for the integration of production lines between mexico and the united states, they could not have been

competitive in basic manufacturing. they could not have exported to major markets in the world. the challenge for nieto will be to convince the united states of the importance of that, even at a time when he is suffering in the ratings in his own country. charlie: so what kind of contacts are taking place? has it shut down? what is the conversation today between mexico and the united states? carlos: today is a low point. essentially, both presidents decided this meeting would not happen, and they made the decision based on principle. the challenge now is to figure out a path to engagement. if you look at two countries next to each other, so intertwined, so many implications for cultural, political, and security issues -- particularly security issues -- that the united states can't afford to not have a relationship with mexico. mexico similarly has a mandate to find a way to engage directly with the united states because of its economic importance. so now they have to find a way

where they have made decisions on principle, to come back and have a relationship again. a critical factor will be when rex tillerson comes in as secretary of state -- assuming he is confirmed. that will create another line of communication and action that will be through more traditional foreign policy channels. i think everyone will be looking to tillerson to make the particular move and outreach to the foreign minister in mexico to find a way to reconstruct the relationship. charlie: how is his standing? bcause he is one who i think made it possible for donald trump to come to mexico during the campaign. how is his standing? he is a close political ally of the president. carlos: the secretary is a controversial person in mexican politics. there are some who feel he is personally associated with president trump and they resent that. there are others who say that

may have been the situation, but now we are in a different type of situation where we have to find a way, negotiate a better path forward, and we have to use all of the individuals who have influence and knowledge. he has a phd in economics from m.i.t. he is schooled in economics and trade issues. he has the ability to pull together and the president's confidence. so those in a small political circle feel he could potentially be a useful actor in these negotiations. charlie: thank you both. we will be right back. stay with us. ♪

♪ charlie: michael froman is here, he was president obama's trade representative 2013-2017, in that time he led negotiations on the tpp. the tpp was a key component of president obama's so-called pivot to asia. it would have eliminated 18,000 tariffs on american products in nations that together make up 40% of the global economy. on monday, donald trump announce the united states would formally withdraw from the tpp, filling a major campaign pledge. his dispute with president pena near to over the much disputed -- nieto over the border wall now threatens a bilateral relationship.

for all those reasons, i'm pleased to have michael froman back at this table. i will talk to him about all of that. what has happened today is the mexicans said, we are not going to pay for the wall. the president of mexico says, then i will not come, because we will not pay for the wall. then trump says we will impose a 20% tariff. help us understand this. michael: it is challenging, because under nafta, we can not impose a 20% tariff without being open to other countries retaliating. so we do that, we are violating our international obligations and that means mexico could raise tariffs on our exports. mexico is our second largest

export market. we export hundreds of thousands ofhundreds of billions mexico everyods to year, supporting u.s. jobs. it is the beginning of a trade tit-for-tat that hopefully will find its way to a resolution. charlie: what would happen if mexico said to united states we will sell that stuff we were selling to you to china or another market? michael: companies would have to reorder their marketing, try to find new markets for their products. the broader issue is threefold. it's the risk of retaliation. of mexico raising tariffs on our products. it's the risk of imitation, whether it is mexico or other countries saying well, if the u.s. can violate their trade obligations, we can raise tariffs on american products as well. since 95% of the world's consumers live outside of the united states, 80% of the world purchasing powers outside the

united states. we need access to those markets to support jobs here. thirdly, it is taxation. when you raise tariffs, you are imposing a tax on the consumers of those imports. low income americans spend a disproportionate amount of income on tradable goods, clothing, footwear, food, so you are raising the cost of the people least able to afford it. in that regard, it could have broad implications economically. both in our country and in our countries.ith other charlie: take the tpp. why was the good for the united states? michael: well, it was good in many respects. by all economic analysis, it would have added more than $130 billion to the gdp, increased exports. charlie: how? michael: by opening our market to other exports. we are a very open market. we have very low tariffs, and we don't use regulations as a disguise barrier to trade. other countries have higher barriers. take automobiles. we have a 2.5% tariff on autos. if a car comes into the united

states, there's a 2.5% tax slept -- slapped on it unless it comes from a free trade country. vietnam has a 70% tariff. malaysia has a 30%. charlie: so, if you sell a car to vietnam, they put a 70% tax on it. michael: tpp would've stopped that. it would have eliminated the malaysia, as well as non-tariff of barriers. these are some of the fastest-growing markets in the world. vietnam has 90 million people, 6% year, and they want what america produces, whether it is automobiles, tractors, high-quality, good nutrition agriculture, services. for us to get into that market helps support jobs here. when you have a market like that with 90 million people, you

usually have two choices. a 70% tariff on autos you want to sell in vietnam. you need to tear down the barrier and keep production in the united states and sell from here, or you can move your factory to vietnam. our view it was better to keep production in the united states. charlie: that was the argument donald trump used in the campaign, was that these trade agreements were not fair and were causing american workers to lose their jobs. michael: i think anybody who actually looks at the agreement , who is in the agreement, are -- iprovisions feel like what president trump says is there was barriers stopping our exports. it is exactly what tpp addressed. 18,000 taxes eliminated. charlie: it was not just donald trump. it was hillary clinton and bernie sanders who opposed tpp, and the president could not get it through congress. michael: well, it was never

formally introduced. charlie: do you think he could have? michael: i think there was more support in congress than meets the eye. you never have the votes for something until you actually introduce it, the leadership mobilizes, you have with operation. i spoke to house republicans individually. i spoke to democrats supportive of trade. i think if it had been introduced -- charlie: after the opposition of hillary clinton and bernie sanders you had to depend on republicans? michael: trade agreements and trade bills are usually passed largely with republican votes and a critical mass of democrats. we had a critical mass of democrats. the same ones who voted for the trade promotion authority last year. the big difference this time was a lot of the mainstream republicans, seeing the effects of candidate trump during the campaign, became wobbly on trade. the question is whether there will be leadership on the republican side. charlie: was the opposition to trade from clinton and sanders and trump based on the same facts? michael: i think the opposition to trade is based less on the agreement itself into the feeling of economic anxiety in the country. we know that technology has a

much bigger impact on the nature of jobs and wages in the united states than globalization. but you don't get to vote on technology. you don't really get to vote on globalization. globalization is a force, it is the result of the containerization of shipping or the spread of broadband. you get to vote on trade agreements. trade agreements become the scapegoat for the quite legitimate concerns that american workers have about wage stagnation, income inequality. i think that's what you saw during this election, and anxiety about the economy, and trade agreements becoming the vessel to which that anxiety was poured. charlie: do think hillary clinton made a mistake in not speaking to these anxieties and that people found relevant? michael: i don't have a license in politics, but a large portion of the population -- charlie: in states that democrats carry, wisconsin, michigan --

michael: absolutely. there was a group of people that felt that president trump spoke to their anxieties in a way that other candidates did not. that'shink the burden --nd charlie: trump said i to know why you lost your job. michael: what we need to be focused on going forward is how the american workforce can live in a rapidly changing economy. the changes of technology are going to dwarf any impact of globalization in terms of the nature of jobs in the nature of work. we are not particularly well-positioned to deal with that rapid change and transition with lifelong learning, skills building. the kind of domestic policies that need to be pursued to make sure people can take advantage

of opportunities and deal with the transition. charlie: at davos, the president of china praised globalization. he said we believe in globalization, are for globalization and want to have an impact on global markets. we want to be a leader. michael: look, i think at the moment we are creating a void that china is all too willing to step into, and to fill. we see that happening. we saw it in davos and we see it across the region. countries saying if the u.s. is not going to engage and show leadership as it did in the context of tpp, we are going to have to line up behind china. they are the natural, dominant party. charlie: and are they already moving to make agreements with vietnam and other countries? michael: they are. they are negotiating a regional comprehensive economic partnership with 16 countries, ranging from india to japan. it's quite different from tpp in a number of important ways. it does not raise workers rights

or labor standards. it doesn't protect the environment. charlie: that was part of bernie sanders and hillary clinton complaining. michael: and that is something tpp did that the new deal will not do. the concern is that if china moves ahead with its model of globalization, which is a state run, mercantile run, interventionalists model where they monitor or cut off the internet, or force companies to transfer their technology or intellectual property to have access to their markets, that is a much more disadvantageous set of rules for u.s. companies, u.s. workers, u.s. farmers to operate in, then -- then could have been possible under tpp. charlie: is it likely we will have a trade war? michael: i cannot answer that. that is up to the trump administration and how they pursue this. charlie: tell me, what would cause a trade war and how you avoid it? michael: what would cause one would be to take unilateral

actions that raise barriers on exports from china to the united states. charlie: the very thing donald trump threatened. michael: that would give china license to retaliate and imitate us, both of which would have a dramatic impact on our economy. charlie: donald trump said he believes in america first. michael: all of us believe our job in government is to pursue u.s. interests first and foremost. it really depends on how you define what those interests are. we have benefited enormously over the last 70 years from setting up a set of rules for the international economy that has allowed capitalism to flourish, markets to flourish, our exports to flourish, and if that is going to be undone in the name of america first, it's going to have an impact. charlie: but is there an

chinant to be made that has not played fair? levelhina is not on a playing field? michael: one of the things that we need to realize is that china is very disciplined in pursuing national self-interest in the most narrowly defined sense. charlie: china first. michael: without taking any responsibility for the international trading system. one thing we have tried to do is pressed them to take more responsibility for the trading system they have benefited from so enormously. charlie: why have they been unresponsive to that argument? michael: in some ways, they have responded, but certainly not enough. that's why it's important to hold their feet to the fire and why the obama administration brought more than 16 trade enforcement actions against them. when we found areas where they violated their obligations, were not shy about bringing a case against them. it's why we have literally hundreds of actions against china for dumping, for illegal subsidies, precisely because if

they are not following the rules we need to be firm in upholding those rules. charlie: they were always angry about their steel being kept out of the u.s. market. charlie: they are -- michael: they are angry, but my response is to stop dumping it. if you don't dump your steel -- charlie: is dumping driving the price down so they can beat the competition? michael: they sell it in our market below what they sell it for at home. it's unfair. charlie: it drives other people out of business. michael: exactly. we have seen that in steel, aluminum, solar panels. charlie: is this the very reason donald trump was able to make an argument that resonated on trade and loss of jobs? whatever we have to do -- michael: i think there was a bipartisan consensus that we should do everything necessary to hold china's feet to the fire and create a more level playing field with them. of course, china is a country with whom we don't have a free trade agreement. the countries with whom we have

them, we have tended to have pretty good trade balances and they have improved over time. china is one we don't have a free trade agreement with and that is where the big deficit is. charlie: they sell more to us than we sell to them. michael: correct. charlie: would tpp have influenced that? michael: china was not part of tpp. charlie: i know, but would it have given muscle, have done anything to be leverage against what china was doing? michael: by raising standards in the region, by saying if you want to be part of the modern trading system you have to have strong labor and environmental protections, you have to have disciplines on your government-owned corporations so

they act fairly, keep an open and free internet, i think it would have forced china to by raising their standards as well. if all the neighbors are offering higher standards, it will have a positive effect on china as well. charlie: do you think those nations in asia look at america and want to pull back and entrench? michael: you have heard comments from prime minister abe, prime and mr. lee, new zealand's prime minister about how withdrawal from tbp damages the credibility of the united states, undermines its leadership, and causes them to feel the need to line up behind china accordingly. senator john mccain and all these leaders in the region have all said withdrawing from tpp will have a dramatic negative impact both economically and strategically. charlie: we have touched on this. what are the three or four countries we export the most to?

michael: canada, mexico, the united kingdom -- though it is way below mexico -- the european union, generally, has a market we export quite a bit to. those are our major ones. and of course, china. over $100 billion a year. charlie: trump has used the term protectionism, which is a term you thought had gone away. by that he means we will do what we need to do to protect american products. michael: look, we all believe in the importance of protecting american jobs, protecting our ability to manufacture here in the united states. we go at it different ways. a couple of years ago, there was a german car company deciding where to put their next manufacturing plant in north america. came down to the u.s. and mexico. they chose mexico. it wasn't because of the difference in wages. it was because mexico had more free trade agreements than the u.s. they could produce that car in

mexico and ship it to more markets around the world without tariffs. we should not lose that kind of competition. we are never going to compete with mexico on wages. we shouldn't. but we shouldn't lose the competition with mexico on free trade agreements, because that is something we have control over. i saw a study that recently came out that said the differential in wages is about $600 per car. the differential in tariffs is -- because of mexico's trade policy -- about $2500 per car. charlie: here is what peter baker wrote in the new york times this week. "mr. trump's move amounts to a drastic reversal of decades of policy. -- end quote

charlie: so the president, president obama, nominated you. what became more attractive to trade more than as a young lawmaker in the senate? michael: the importance of being engaged in the world, u.s. leadership, the fact that we need to be in these markets if we will support jobs back here. he was also informed by experience in chicago as an organizer, the effects of steel mills closing down. not trade for trade's sake, but if we can do it right, lowering tariffs, leveling the playing field, that is the kind of trade deal we should do. as a candidate, he called for the renegotiation of nafta. he was very specific, let's make sure mexico has binding labor and environmental regulations. tpp.s what we did in

through tpp, we renegotiated nafta. charlie: how do americans feel about trade agreements? michael: the united auto workers supported the agreement with korea a few years ago. other than that, i am not aware of another trade agreement that they supported. charlie: thank you for coming, great to see you. you will be with the council on foreign relations for a while? come back to see us. back in a moment. ♪

♪ charlie: richard haass is here, the president of the council on foreign relations, and a veteran observer and participant in foreign policy. his latest calls on president trump to fix a world that is said to be spinning out of control. it is called "a world in disarray: american foreign policy and the crisis of the old order." i am pleased to have richard haass back at this table. welcome. so, where are we, how did we get here, and where do we go? you reach back centuries in this book. richard: where we are is a world in disarray. many of the institutions formed after world war ii have essentially run out of gas. the disciplines and constraints of the cold war now 25 years gone. you have a distribution of capacity in many hands, many states and nonstate.

you have globalization that has created challenges the world cannot even begin to keep up with like cyber, proliferation. the middle east has been unraveling. europe, with the refugee crisis, brexit, russians in ukraine. north korea is putting nuclear warheads on missile that can probably reach the united states in a few years. how did we get here? some of it is the stuff of history. countries rise, globalization happens, the cold war ended. some is the result of what the united states did, the iraq war, the libya invasion, pulling troops out. some things we didn't do. barack obama in syria, the red

line. not following up on the invasion of libya. in the last couple of days, the decision not to go ahead with the transpacific trade partnership. united states has long been a champion of free trade. all these countries in asia and latin america lined up with us and all of a sudden we are yanking the footballl away. these countries feel left in the

lurch. it is the combination of history, things the united states has done, things that the united states has failed to do. charlie: is it a vacuum of leadership that china, most interestingly, is prepared to move into? richard: not so much. they are limited by their own politics. charlie: this year, president xi jinping saying they believe in globalization. richard: up to a point. the chinese have a constraint political system. they want to keep power. they don't want things to loosen up too much. i think it is a world of increasing when i would call disarray or disorder. countries like china might have a large role in asia. countries like iran, turkey, israel, my had a role in the middle east. it is a world of local powers but also a world of growing disarray and at times chaos. charlie: what does the world need? richard: the world needs a united states ready to play more of a traditional leadership role. charlie: that is not how you would define donald trump? richard: not at all. in just a few days on the transition, he has contributed to the disarray by creating questions of whether the united states is liable, prepared to support our allies, free trade.

the whole "america first" characterization sends out a signal that we are just in it for ourselves. what i am worried about is that a lot other countries will say, if the united states is no longer in it for us, we have to take care of ourselves. on some issues, that means they may defer to a local power. say, china. on issues, countries may say, we have to take matters into our own hands. i don't want to have a world where everyone takes matters into their own hands. proliferating nuclear weapons were saying, if i don't act militarily, someone else will gain control of something. charlie: talk about trump in terms of the actions he is taken in the foreign policy field. richard: he has taken some serious people. secretary of defense and secretary of state. charlie: they include the cia director. richard: these are all seasoned individuals. the problem is that they are all on the periphery. what really matters is the

relationship between the periphery, the various departments and organizations, and the white house. the white house has become a crowded place. a president, vice president, chief of staff, chief advisor, chief strategist, son-in-law. a national secrity advisor. kellyanne conway. we don't know how they will work together and we don't know the relationship between all of them and, say, a secretary of state. go back to jim baker, when he was george h.w. bush's secretary of state. everyone around the world knew that when jim baker talked, he was speaking with full backing and authority of the president. i am not sure that when rex tillerson speaks, people will be assured that, when donald trump is either tweeting certain things are when people at the white house are saying things a

inconsistent with the message. charlie: it is in his dna to be hands-on with everything and believing it is ok to say what he thinks. richard: donald trump, if you read the inaugural speech, the entire intellectual assumption of the speech is that the united states is getting ripped off by the world. allies aren't doing good enough, trade is bad for us. we' him him him him himre spending too much in the world. charlie: how do you think the chinese will respond to that if in fact the united states does not adhere to a one china policy and develops a legendship with taiwan's separate from china, and secondly the united states tries to say to them that you have to stop and abandoned the south china sea? richard: on the former, that is the most politically loaded issue in china. the chinese don't take the cohesion of their country for granted so they see the taiwan issue as the pulling on the thread of the fabric of their country. there is zero chance any person running china could compromise on that issue and continue running china.

plus this year is not just any year. xi jinping, in october, has the 19th party congress. this is his chance to consolidate power and put in his people in the standing committee of the politburo. zero chance that will be one inch of flexibility. on the contrary, if president trump continues pursuing a policy on taiwan that the chinese see as inconsistent with the one-china policy, they will shut down the relationship and retaliate. charlie: how do they retaliate? richard: they could shut down taiwan's trade to the mainland, increase military in the region, maybe decide that they don't want to accept all those boeing planes that are being discussed. there are ways that they could put economic pressure on them. i don't mean that we couldn't retaliate and do something, but we have to understand that this is going down a path where there will be no winners. it will also be that the two sides won't have the context to cooperate, say on a issue with north korea. charlie: with russia, again, the principal people advising him seem to have a tougher stand on russia then he has acknowledged. richard: that is right. he himself as well as the

national security advisor have this benign take on russia. on one hand, we should show respect to the russians, be willing to talk to them, treat them as a serious country. on the other hand, the goal of our relationship can't just be friendly relations. we have to see some real changes in russian behavior, see them backing off of the pressure they are putting on eastern ukraine, make sure they are not putting pressure on the baltics. i think we should be doing things to on the ukrainians and reintroduce significant military forces into nato. if we are to reduce sanctions on russia, it has to be conditional. charlie: we do not know what behavior the russians could do to precipitate president trump from lessening the sanctions. he has suggested that there may be examples of russian conduct that could cause him to want to reduce the sanctions. richard: again, if they stop doing certain destabilization action in eastern ukraine, he may say they deserve some response from that.

he could give some kind of a statement or a pledge that the united states could not try to bring out some kind of regime change in russia which they are in worried about. in charlie: why is he worried about that if he has such huge popularity with his people? richard: he saw what happened in ukraine.

he saw the president get chased out of the palace by a mob. the economy is contracting in russia. he thinks one of our goals is to see the so-called color revolutions you saw throughout eastern europe. most tyrants don't take for granted their ability to rule. there is no orderly successor. one of the things that makes these countries the kind of systems there are is that there is no mechanism for legitimate political change, so it is all or nothing. charlie: do you think there can be a negotiation with putin? richard: i think there can be negotiation about certain issues, conventional forces in europe, nuclear weapons, possibly ukraine, the middle east, afghanistan. say the goal in foreign plicy --

richard: absolutely. what we don't want is a cosmetic improvement. we don't want the era of good feelings. we don't want to have that kind of cosmetic stuff. what we want is a very businesslike set of conversations and hopefully we see some very tangible changes in russian behavior. if they are willing to do that, we should respond. ch himarlie: henry kissinger me, the say to possibilities of doing something interesting and dramatic change comes when everything is in disarray. that is when you have an opportunity to change. richard: it gives you some things to work with. but only if you have the will. charlie: fluidity. richard: fluidity creates opportunities, things you can exploit, act on. but, you then have to be willing to pursue policies over time,

put resources in a way that can turn those opportunities into realities. it does nothim him automatically happen. by not doing things are doing other things, turning disarray into opportunity rather than anarchy. nothing happens automatically for good in the world. there is no invisible hand like adam smith talked about in the economic marketplace, it takes visible hands. the real question is whether we are going to do it. under barack obama, quite often we were not. the real question is whether under donald trump we will be willing to have the visible hand of the united states. charlie: who has the strategic mind to create a new world order? richard: i think there are ideas out there. i did my best to put one out in this book, basically a new operating system for the world. we have had an operating system in the world, a set of rules, for nearly four centuries, which was very basic. you don't use military force to

change borders and you allow governments tremendous space to do what they want in their country. i call that world order 1.0. it i hims himbased on the idea ty.sovereign hi when i argue is that during the era of globalization, that is necessary but not sufficient. charlie: we now have all kinds of means to transmit, transform. richard: the conveyor belt of globalization. something breaks out -- suddenly, zika virus or worse can spread around the world. digital things can spread instantaneously. terrorists, hackers, climate change. none of these things respect borders or geography. what i say as now we need a

world that i called 2.0, where sovereign states have the obligation -- we should practice and encourage it -- to monitor things that go on within their borders that could have a negative effect on others. remember after 9/11, we established the principle that no country could harbor terrorists that could strike others. they didn't have the rights within their sovereign limits. you want to take that principle and attach it or extend it to virtually anything else that could affect us everything else negatively. charlie: what do you mean by paralysis by analysis? richard: it is the tendency, we saw it quite a lot in the previous administration, where you are presented with a set of issues, syria or something else, and you look at it and look at it and persuade yourself that anything you do is complicated, has such downsides, and you end up doing nothing. the only problem is, in my experience, i have worked for four presidents, it is very rare people assess the option of not doing anything different. charlie: what is in your mind the misunderstanding or erroneous assumption about the world works from barack obama? richard: i think the problem was he had too many people from

legal backgrounds. alienate everyo lawyer watching. i'm sorry. but law is about a set of rules. you play the game by the rules. i think barack obama had that and a sense of optimism that human nature and i think he believed that things could get better by the power of reason, that people would be restrained. what i think he never quite internalized is that evil can triumph over good, people have agendas that they are not willing to compromise on, so unless you push back there he hard, that forces can gain the upper hand. i don't think he appreciated the capacity of evil, ideology, people's willingness to use military force. we saw in the middle east, we saw in europe. in many ways, he was more reasonable than the world he inherited. charlie: he could not understand the threats to the world that he saw? richard: he was very wary of large-scale american commitments.

again, he came into office promising to undo the commitment to iraq, the commitment to afghanistan. he overlearned the lesson of his predecessors. george w. bush was trying to do too much to remake the middle east. barack obama historians, i will predict, will be the president who tried to do too little. charlie: should he be blamed for the fact that there was no american presence in iraq? richard: i think, yes. the argument that we had this agreement and his hands were tied was not true. he himself introduced more than 5000 american soldiers without formal agreement by the iraqi parliament. he did not want forces to stay in iraq. charlie: any idea that somehow the iraqis didn't want it is something wrong? richard: yes, and we could have worked around it like we did when we reintroduced military forces. right now, 5000 are in iraq without the sort of agreement the administration said it

needed. charlie: was the classic mistake in syria red line or was it not being timely with respect to the rebels? richard: all of the above. perhaps the first mistake was saying assad must go without backing it up with the policy in which what we were prepared rhetoric.ur you can't have ambitious rhetoric and limited means. they have to be in sync. charlie: when you say someone has to go, you always run up, head on, to the question of what follows? richard: what if he refuses to go? we will face that again in syria. it is not a question of when we defeat the isis territorial base, but what happens the day after and how do we prevent and isis-like group, whatever they call themselves, the next

radical jihadist group, how do we prevent them from inheriting? charlie: it is interesting what trump said in his inaugural speech. he did not say he would eradicate isil or isis, he said he would eradicate radical islamic extremism. richard: in some parts of the speech he set goals that i would say you can't meet, and that is one of them. what we need to do is reduce terrorism to the level that it doesn't change the way we live our lives. exactt doesn't really significant costs. will always be people to wake up with these ideas, whether they use box cutters or knives or guns, they are always going to find a way. the true nightmare scenario, they get a hold of nuclear stuff.

charlie: or they get -- they build a series of things we can't imagine now. because technology is moving so fast. richard: something biological, or a collapse of order. charlie: i once did an interview with barack obama and said the following, "you believe we have the strongest military power, best technology, best universities, on and on, the best rule of law, strongest institutions, so what could go wrong?" he said, "our politics." which means gridlock, the kinds of threats to democracy that he was talking about in his farewell speech. richard: i think on his watch, our politics did go wrong. the word you and i probably use more than any other in describing american politics is dysfunctional. we have been unable and unwilling to address some of the core problems. infrastructure, schools, immigration, the national debt.

that means the example we send to the world is not compelling. others get disillusioned. lose our ability to act in a concerted, consistent way is not when it needs to be if we are to be effective in the world. in that sense, the former president is spot on. charlie: what was your reaction to the inauguration speech? richard: the adjectives i expect if he is watching this he won't like. i thought it was dark, much darker, particularly domestically, then the facts justify. divisive.it was quite between "people" and the "political elites," it was very divisive. it was protectionist, by american, higher american. if everyone else in the world follows that formula, the

chinese only buy chinese and -- charlie: the pipeline, only using american steel, any worker ever worried about losing their jobs said, "right on." they are thinking about the fact that we have got somebody who is standing up and wants to see american products. richard: absolutely, and in the short run, that will work. in the long run, millions of american jobs are export dependent. many of these jobs will disappear anyhow because of technology and artificial intelligence and robotics. driverless vehicles. basically, trade is being scapegoated. it is raising doubts about our reliability and we are not going to save jobs, not going to help american workers, not going to help american consumers if we shut our borders to trade. we are also not going to help ourselves with mexico. one of the reasons the last few years we have had a net outflow of people going from the united states to mexico is because of nafta.

nafta, this agreement helped to make the mexican economy modern, more robust. more and more young mexicans stayed home. because that's where the jobs were, mexico has had a higher growth rate than the united states. if we end up in a trade war with mexico, ironically enough, the pressure on american borders from mexico will go up. right now, there is an inconsistency tween what is being said in our trade policy and desire to make our borders secure. charlie: did you send a copy of this book to 1600 pennsylvania avenue? have they read it? richard: keep hope alive, i sent one at that point to the president-elect and the national security advisor. charlie: did you say, if you read this, you will be a better president? richard: i would not go that far. we will see what happens. charlie: "a world in disarray: american foreign policy and the crisis of the old order." richard haass, who has both

experience and intellect, and understanding of the issues that are in play in the world today. thank you for joining us. ♪

♪ carol: welcome to "bloomberg businessweek." i'm carol massar. oliver: and i'm oliver renick. carol: in this week's issue, wilbur ross. oliver: the consequences of what happens when international trade agreements are broken or dissolved. carol: russian television fawns over trump as though he were a pop star. oliver: all that ahead on "bloomberg businessweek." ♪ carol: we are with the editor-in-chief of "bloomberg businessweek," megan murphy.