♪ announcer: from our studios in new york city, this is "charlie rose." charlie: jake sullivan is here. he served as deputy chief of state to hillary clinton. he is also a senior policy advisor on clinton's 2016 presidential campaign. he has been one of her closest aides for over a decade. many believe he would have been national security adviser had clinton won the 2016 election. he is a visiting professor at yale law school and an advisor for the u.s. government on the iran nuclear negotiations. i'm pleased to have him at this table for the first time. welcome.

to know a little about your life is to see a remarkable series of progressions. what is the key to that success? >> i think the single biggest thing is saying yes to opportunities when they come along. i always thought i would head back home to minnesota and build a career in law and politics. when i finished with jessica fryer in 2005, i moved home thinking that is where i would be. i joined a law firm and got engaged in the community. amy close our -- enclosure -- asked if i would come out and get her running --up and running her first year as a senator. the opportunity came along to help hillary clinton and prepare her for the debates in the primary. the next opportunity came along. each time, i found a chance to serve. the result has been a extraordinary opportunity for me to learn and try to do a few good things along the way. charlie: without modesty, tell

me what you think you brought to the table. >> it is something both justices taught me. no matter how right you think you are, whatever your argument is will have weaknesses and blind spots. no matter how wrong you think the other guy is, they will have some good points to make. and you need to acknowledge both of those things. i learned that early on. i tried to study the weaknesses on our site and what the good arguments were on the other side. if you take the iran nuclear negotiations, i spent a lot of time with lucifer -- vociferous critics of the deal to understand the concerns. said on athe team and few of these points, they are not wrong and we have to find a way to close this hole. in addition to working hard and studying the issues, that is a skill set that is really important in washington and is getting to be in short supply. charlie: meaning making sure you

hear the other side? >> even more than hearing the other side, that you study your own position more than i think most people do and you are willing to change your mind. you are willing to say i thought that was the right way to go about it. it turns out, we should do it a little bit differently. charlie: there is an interesting glimpse in the book, "shattered," about the campaign in which secretary clinton was being bombarded with questions she might face. "you tryasically said, this, you will see how easy this is." >> we were doing debate prep the day after bernie had won the michigan primary. it was a hard day. before a setami of important primaries. i was chiding secretary clinton for her answer to questions. she said, let's do it this way. why don't you be me and i will be bernie, and we will see how

you do. the book makes it sound like it was incredibly rancorous. it was not. i think she was basically trying to put me in the position as an advisor of what it is actually like to go through this. it was very informative. i wish i had done it in 2008 because i had gone through debate prep for her in the 2008 campaign. it was late in the game i understand from the perspective of the person you are preparing what it is like to go through that. that is exactly the kind of thing i feel folks in my position should do more of. in 2008, you were working for her rather than him? >> i worked for her in the primary. i was part of the debate preparation team that prepared him for the debate against john mccain. charlie: we will hear this when she writes her book about what happened. he were there. you saw what went on. what happened?

is a reason she wrote a book because it takes an entire book to explain the different strands of coming together on one day in november to produce a defeat. i think if it had been any other day, she probably would have won the election. in part because what happened in the closing days of the campaign. jim comey k not 10 days before the election. charlie: you guys had momentum. >> exactly. he came out two days before the election saying i am eggs honoring secretary clinton. this was an election with ebbs and flows that happened repeatedly. if you look at any chart of the gap between trump and clinton, it would get wider and narrower week by week and month by month. it was only at very certain points for a few days at a time that trump closed the gap and

got even. this was one of those days. if it was a week later or earlier, i think the odds she would have won would not have been small. charlie: people say if uber tom frieden had had two more weeks, he might have won the election as well. >> i cannot say it with any degree of servitude the best certitude. i divided the challenges we faced into three categories. the first category is the in variables, the f.b.i. investigation and the fact of a sophisticated, systematic kremlin-directed information warfare campaign by the russians. both of those had an impact. charlie: you believe that the hand of president putin. >> our intelligence community determined this was from president putin at the highest

levels of the kremlin, that he had an interest in seeing donald trump win and hillary clinton lose. because he did not like hillary clinton or found something attractive about donald trump? jake: i think all three things. he wanted to disrupt american democracy no matter who the candidates were. charlie: ukraine as well. jake: it was partly tit-for-tat, payback for what he felt was american intervention in russia and ukraine. both of which i think are dead wrong. but it was partly also that he is trying to drive a model, an authoritarian model, and his -- discredit democracy. he is trying to do it across europe and the united states. he wants to be able to turn to his people and say keep me in power because the alternatives are these broken down systems with all this chaos, whether it is germany, france, or the united states. sowing chaos in democracies is putin's number one way of

maintaining power for himself in russia. i think that was part of it. he had a personal beef with hillary clinton going back years. part of it was about her gender and part of it the fact she took tough stances against putin's behavior in eastern europe and against his own people. and then i think he genuinely thought it was a birthday present for him that he had a candidate like donald trump who not only adopted kremlin-favored positions on almost every issue but also adopted the language and logic of the kremlin, talking about how we cannot say anything about what happened in russia right now because we have killers, too. that is exactly the kind of thing putin would say. charlie: he said that in an interview. do you also believe president obama could have made a difference had he been stronger in his own declarations about russian hacking? jake: i think president obama was in an impossible position. here he was commander-in-chief, trying to defend american democracy, but also the standard-bearer of the democratic party in the middle

of an election with a democrat against a republican. i think he wanted very badly to avoid any appearance he was putting his thumb on the scale in the election, and that is to his credit. i understand why he decided not to. knowie: you say you now the humility of defeat. was this the first time you have been defeated, wanting something badly and not getting it? jake: i suppose you could say it is the first time on any scale that matters. i've done everything from lose cross-country races to doing badly on tests, to in the past not getting exactly the job i wanted at different points. but this is the first time where something was riding on it beyond just what i wanted. charlie: what was in the best interest of the country. jake: and the merger between my own desire to win with a competitive streak and i wanted

the opportunity to serve again and having hillary clinton as president and not donald trump i thought would have made a profound difference for the future of the country and the world. this was on a scale unlike anything i had experienced before. and it is something you got to look at, learn from, see what you could have done better. but not just make it about yourself. i should not just make this about myself and this is also about how to think about the future of the united states, both our policy and politics, and our sense of how we relate to one another. i think the core question of who are we as a country is very much up in the air. charlie: did you say things the campaign and her believed in but somehow they were not heard? somehow because of how campaigns work or how people perceive the person speaking it did not get through? jake: after the campaign, i had a meeting with one of the british politicians leading the

remain campaign for brexit and , they lost. i was working on the campaign losing to trump, and this is a guy who lost to brexit. he said in both cases, the common denominator was we were trying to provide answers and what people really wanted was anger, the sense that you got the system was broken. they did not want dry policy. charlie: i don't think that is in either/or proposition. don't you have to say to people you"?pport you, "i hear " i feel your pain?" jake: you do. but the question is how you balance the diagnosis part of your message and the prescription part of your message. both bernie and trump were heavy on the diagnosis. that is really what people wanted. hillary clinton by constitution, by who she is fundamentally, is much more of a prescription person. she is going to want to look at you and say i can help solve your problem through the following four steps.

charlie: where would you put her husband? jake: i would say he has more of the diagnosis in him going back to his days as a politician pressing the flesh in arkansas in the 1970's. he "i feel your pain" he piece of bill clinton is famous about his personality. if you look at what hillary clinton was arguing for in this race, the types of policies she was pressing, and you look at what the democratic party has embraced as their message going forward, they are very similar. hillary was on the leading edge of many issues now coming to the fore. for example, she talked a lot about growing monopoly power of corporations which is becoming a progressive watchword. charlie: one of the keystones of bernie sanders' campaign. jake: but one of the things hillary did that bernie did not talk much about was this issue of antitrust and competition and market concentration.

bernie talked about breaking up the banks. charlie: wall street. jake: he talked about single-payer health care. but the idea the corporate sector in the united states is getting consolidated and concentrated across the board and as a result people are extracting monopoly ransoms, this was an argument that had a long history in the democratic party going back to the populist days that hillary was putting forward that is now at the center of what the democrats are arguing. that is just one among many examples where i think she was on the right track. but our capacity as a campaign to connect that to the lived experience of people across the country was not -- charlie: how much of that is a question of the candidate and how much of the campaign? jake: it is hard to say when you are the campaign and not the candidate. i have a tendency to take responsibility on our shoulders. hillary was out there busting her tail every day doing everything she could. i like to believe there was more we could have done to set her up

for success. charlie: how have you handled the defeat yourself? how do you deal with something so monumental that would have shaped the next eight years of your life if she had won? jake: you have to look at the real ramifications of this. the effect on me in my life compared to the effect on the lives of immigrant families or 11 million people who are scared when they go to sleep at night, it is hard for me to even ask that question. all i can do is think, now that this has happened, what can i learn looking backwards? but more importantly in the landscape we face today domestically and internationally, what can i do to help to be constructive and to recognize whatever you think of donald trump, 62 million americans voted for this guy. those people had an argument to make about how government was not looking out for them.

and we owe them answers as well. i'm looking to find what those answers are. charlie: you said the biggest challenge in the campaign as a policy guy is pushing through the social media chatter to engage with the american people in a serious conversation about real issues that impact their lives and the future of this country. i think candidates are equally responsible for that because those of us in the media, especially at this table, wanted nothing more and would have done more. because of the risk, people don't want to do it that much. jake: i would say if hillary clinton had been given the opportunity on a nightly basis every night and they make policy presentations and that is how the campaign was run, she would have taken it in a heartbeat. charlie: what i think is better is engage in conversation. jake: fair enough.

a ruthless, brutal, interview on name your subject. what are you going to do about american military engagement? if that had been the setup of in the campaign, not only would she have welcomed it, she would have shined doing it. i will give you one piece of evidence. all three of the debates did cover the issues and all three of which she came through with flying colors. of all the criticisms to make against hillary's campaign, the idea she was not prepared to really go at the issues i don't think is right. the thing she has -- charlie: you will grant me, how many one-hour conversations did she do? jake: i could add up for you the number of interviews she set aside thinking they would be on policy subjects and the first 30 minutes of them were on the emails. i think there becomes a real issue of balance.

a good example of that is the national security forum where matt lauer had 30 minutes with hillary clinton and 30 minutes with donald trump on the big national security issues of the day and spent the bulk of the time on emails. the point is hillary would constantly walk into interviews with the hope they would get around to her policy positions. i would argue one of the things that makes it hard for her to be a candidate is she has a responsibility gene. she feels responsible not just for giving the best answer on the campaign trail but the answer she believes she could deliver governing. it does not make for a simple message, but it would have made for a good agenda for working families in the u.s. charlie: what is going to happen to the democratic party? jake: i think the democratic party is going to be ok. there is a strong internal

debate going on about the substantive direction of the party. as you saw from what chuck schumer and nancy pelosi put out a couple of weeks ago, there are core pillars to a policy agenda that span the party from bernie sanders across. i think that will sustain us through 2018 and 2020 cycles. charlie: aren't those the same issues that were talked about in 2008 with candidate obama and candidate clinton and also 2016 between candidate clinton and candidate sanders? it is the plight of the middle class. that has been a central issue, a political issue. what we don't know is how you stack up different prescriptions going back to policy. jake: there is no doubt the number one problem is how you reverse the hollowing out of the

american middle class. that did not start yesterday. that has been going on for 20 years. charlie: why have we not been able to deal with that? jake: i think our policy choices have had a lot to do with it. a lot of people like to blame globalization or automation. but fundamentally, it has been about the fact we have had a congress but also at various points in time presidents who aggressively pursued policies unions, that out took away basic workplace protections and cut taxes in , ways that starved the government of revenue to provide a social safety net. i think our choices have contributed to this. we have it in our power to make the forces of globalization and automation work for us rather than against us.

i do think the prescriptions have changed. charlie: have they been articulated? contempt for globalists? jake: this gets back to the diagnosis versus prescription. it is easier to diagnose rather than say let's talk seriously about the solutions, including solutions that are hard for people to hear like the fact that coal jobs are not coming back. i think as we go forward into 2020, this issue is crystallizing. our economy is changing rapidly. there are huge storm clouds on the horizon about how automation is going to disrupt jobs more rapidly than before. that is focusing the mind. i have come through a difficult last campaign, but i retain some optimism going into the next campaign that the american people are ready to hear from people how we are going to do this.

charlie: in other words, they heard somebody listening in 2016, donald trump. now that you have listened, what have you done? what will somebody else do? we will hold you to the same standard. jake: they heard bernie sanders and donald trump do for them what they felt they had not gotten in several years, which was a cry from the gut that this is not working. now they want to know what will work. i do believe that. i think there are a number of intriguing voices in our party putting forward ideas around the future of corporate responsibility, how we build a new social safety net in a world in which people do not stay the same job for very long, around how you train and educate people for the jobs of the future. these are ideas that have not gotten a full airing and are not just retreads. charlie: i totally agree. you would think with the onrush of technology and different circumstances, clearly there are

new problems and ought to be new solutions. here is what is interesting to me. i interviewed president obama in germany. i said we have the best economy and best technology. we have the best universities. we ought to be able to own the 21st century. what could stop us? and he said, "our politics." that is one thing he came to washington -- he came as president believing he could do, believing that he could bring bipartisanship. bob gates said to me the most difficult problem for america is not in any foreign land. the most difficult problem is the three square miles between virginia and maryland. lots of people agree washington is the problem. gridlock between john boehner and barack obama. how do we deal with that? jake: what we are up against is

really severe. in have people living alternative universes in terms of media a consume. charlie: they watch what says what they believe. jake: if all you do is watch fox news, you would think one thing. if you watch msnbc, you would think another. then you have gerrymandering and voter suppression. these are huge problems for our democracy. and then campaign finance. i will give you an optimistic take on this, which is i don't see washington dramatically changing overnight given that combination of forces. but the policy innovation that has real-world impact we are seeing at the state and local level is dramatic. donald trump just pulled out of the paris climate agreement. we are likely to hit our paris climate goals anyway because even republican governors are recognizing -- charlie: and corporate america. jake: and corporate america has fully bought into it. the investment decisions they are making will drive policy to a greater extent.

i believe the nature of problems in the 21st century requires network solutions. and the united states is best situated to lead in that because we can most take advantage of networks from universities, private sector, and build global coalitions to take them on. that said, if donald trump actually implements the kinds of things he talks about, and he has not done as much of that as we would have feared so far -- charlie: like replacing obamacare. jake: replacing obamacare, getting us into the kind of trade war that could crash the global economy, deciding we will retreat entirely from global problem-solving, doing more things like paris -- as long as he can be constrained from that very destructive agenda, the kinds of things you have heard from his advisors, as long as he can be constrained from fully carrying out the agenda, the united states has all the

capacities to lead and win. charlie: constrained primarily by congress? congress responding to the people? jake: by having to stare in the face the consequences of certain decisions and deciding not to pursue them. i don't know if that will hold him or his team back. but it seems that will at least present one factor as they move forward. ♪

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charlie: let me turn to foreign policy and the most pressing issue today. north korea. we had today, secretary mattis weighing in after the president had weighed in. and the north koreans have waded in about guam. where do you think we are and what are the risks of where we are? jake: the dilemma that we are facing, and they are discussing, is there a third alternative? other than war on the korean peninsula or north korea having an icbm -- is there another way to resolve it? nuclear weapons that can hold us at risk. those are two unpalatable options. is there a third possibility? they go in to work and think, how do we find it? what they've concluded is that the answer lies in a combination of pressure and getting the chinese to shape north korean

behavior so they stop their march forward. charlie: there is no question in your mind that china could korea's nuclear path in the moment by cutting off? not buying their products. in a sense, paying them off. jake: i do not believe the chinese could get north korea to completely give up their nuclear program because i believe that kim jong-un sees his nuclear weapons as existential to his regime so he will not give them up. i believe the chinese could get the north koreans to stop moving forward. , no moreo more tests advancement a capability. charlie: leaving them where japan may be? or other countries who are on the brink of having it if they wanted. jake: they are beyond that because they actually have the weapons. we need to work overtime to roll that back, but in the near term, the immediate goal should be a

halt on further testing, missile testing and nuclear testing , because if we halted it now, we would be in a position where we would have time to deal with the broader north korean nuclear program and i think china has the capacity to do that. the question is, is all of this tough talk from the administration a means of trying to get the chinese's attention so they feel a greater incentive to do that or is it a precursor to war? charlie: talking about fire and fury and all those things. jake: the amazing thing, you know, if you read donald trump's statement without his name on it and you read a statement from kim jong un without his name on it you really wouldn't be able to tell the difference. that's a problem. we are the world's super power. north korea is the hermit kingdom. mark twain used to say when you argue with the full, you have got to be careful, because people won't be able to tell the

difference. the thing goes for bombast. that is why i think having toughly worded statements like what secretary mattis put out today is fine, but donald trump popping off at the mouth about fire and fury is not helpful in any way. it's not tough. it is inconsistent. it's lashing out. charlie: is there a possibility it'll get their attention like normal language like strategic patience will not? jake: i think the statement you saw from secretary mattis today where he described the sheer capability the united states has to deal with north korea, that will get the chinese attention as much as what donald trump says. charlie: interesting you said it will get the chinese attention rather than the north koreans. jake: more so, yes. charlie: you think it was directed to the chinese rather than the north koreans? jake: i think it was directed at both. i think secretary mattis and the administration is genuinely concerned about the north koreans carrying out a provocation in the near term and they want to warn them, but i do

think as a strategic matter the main audience is china, because they would like the chinese to understand that in the absence of china taking decisive action right now, we could end up in a military conflict. the problem when you go the extra step that trump goes and you start hurling around threats and insults, that actually could provoke the north koreans. that is dangerous, because they don't know how to interpret that. from my perspective better to have strong words -- charlie: to do something like launching an attack of some kind. jake: potentially against south korea, for example, that puts us off to the races. charlie: to defend south korea. jake: right. charlie: when you look at the chinese today, the obama administration had a policy which was called shift the attention to pivot was the word that was used. shift the attention to china, latin america, asia. did that ever get, ever happen?

jake: in important ways it did happen. i'll give you a couple examples. there is a group of leaders in the asia pacific called the east asia summit. and before president obama came into office, the united states was not part of that. this is the premier economic and political security forum in asia and the united states didn't have a seat at the table. the chinese were there, the indians were there, japanese were there, all of the southeast asian countries, even australia. america wasn't there. president obama, secretary clinton ended up putting us there. we are now at the center of major institutions in asia. that's one. two, we have engaged in a forced shift in the amount of military posture we've built up in asia as compared to the rest of the world. charlie: to say what to china? jake: not just to china but the entire region the united states is going to enforce a rules -based order. we're going to make sure that there is freedom navigation in the south china sea. people hear about the south china sea and think it is a far away place. a third of the world's merchant tonnage goes through the china

sea. if china decided to shut it down, that would have dramatic consequences to the united states. so part of what the american naval presence says is, we are going to make sure the sea lanes are open. we are going to make sure our allies are strong. we are going to make sure no country can dominate other countries and be adverse to our interests in doing so. charlie: what do you think the chinese want? jake: ultimately, the chinese would like to be the preeminent power in the asia pacific. their notion of what that looks like is quite different from the american notion. the united states, for all of our faults -- charlie: you can also argue they were the preeminent power at some point in the long history of china. jake: yes, but, of course with technology, force projection, economic interdependence, what that means today compared with centuries ago is dramatically different. and what chinese dominance in asia looks like compared with american leadership in asia is quite stark. you know, the united states had failures and flaws in its foreign policy, but one positive but one constant through

line has been the notion that we believe we can advance our national interests and also help other countries advance theirs as well. charlie: not a zero sum game. jake: exactly. it is positive sum. the chinese use the phrase win-win, but for them it really means we both win if you get out of our way. so i think the region would be worse off without a strong, and during u.s. presence in area. charlie: do you believe china wants to be the dominant power in the world? and believes it has sufficient economic power it should have a bigger voice than it does? jake: i definitely think that, and i think they're right. i think the chinese deserve -- charlie: as an economic power? jake: a seat at the table and a larger voice in the decisions , for example, in the management of the international monetary fund. the fact that they haven't gotten that yet is -- charlie: shouldn't we be helping them get that? jake: it was a policy of the obama administration to help them get it and congress stood in the way. i absolutely believe that it should.

that being said, with that extra step of china having more of a voice at the table, having more capacity to shape decisions, and be a player, comes responsibility. the chinese for a long time in the global economy have played a selective stake holder role. something of a free rider. they follow the rules they like and don't follow those they don't like. along with a greater voice and vote, they should be also taking on more responsibility to do their part to uphold the basic rules of the international economy. charlie: they've been told as you remember that they have to decide whether they want to be a stakeholder and act like a stakeholder in the conduct of their affairs. jake: right. charlie: when you look at russia today, what do you think putin's ambition is? jake: as i was saying earlier in the context of the campaign in talking about why he intervened in the united states, i think putin's number one ambition is to stay in power. his second -- charlie: is he at risk of losing power? jake: so, putin for a long time

had a basic bargain with his people which was, i will rule like an authoritarian and enrich all of my kleptocratic friends, but i will also help you do better economically. that is no longer happening for the average russian family. charlie: because they're energy dependent? jake: because they're energy dependent and they haven't modernized their economy in any way. oil, the oil prices went from a high in the 120's when russia was doing real well, now down to less than half of that. the long-term future doesn't look very bright for that. so, he made a second bargain with them, which is keep me in power, let me enrich all of my friends and your living standards won't go up, but i'll restore glory to russia. you'll feel better about yourself. that was the intervention in the ukraine, the intervention in syria. i believe that, too, will wear off, because the russian people are going to get tired of sending their people to go fight in other places. charlie: it is undeniable they are a leading player in terms of what happens in syria. jake: they are absolutely a critical player in terms of what is happening in syria.

charlie: because they went there in support at the invitation of assad. jake: and because they were prepared to set aside any sense of basic human decency. charlie: in terms of the plight of the syrian people. jake: yes, to carry out and support a campaign of mass slaughter. charlie: has that changed since trump became president? jake: which part? charlie: russia's policy with respect to syria. even though they have an agreement now? jake: in fact, i would argue russia believes at this point it can achieve all of its objectives in syria, essentially ensure assad is in power for the indefinite future. that it will protect its own military position in the country. charlie: most people will argue that i know will argue they don't care whether assad is in power. they just want to make sure there is stability, because what putin fears most of all is instability. jake: having dealt with the russians directly for years on the syria question when i was in government, i heard them saying repeatedly we don't care about the future of the syrian crisis. however, their actions have always suggested that defending this regime, because they see no

alternative to this regime, assad at the top -- charlie: will it be acceptable to the united states? jake: that would be acceptable to them, they see no alternative acceptable to them, other than assad. they don't see someone they could bring in as a replacement that could hold the country together and protect their interests. even though, in theory, they're not wedded to assad, in practice, they have been joined at the hip with him, and they have basically defended his prerogative all the way through. and i believe will continue to do so. i think the deals they are currently cutting are setting them up for success for themselves, for russia. at the expense of the syrian and sunni communities, which is the majority in syria and long-term regional stability, because it is not going to deal with the underlying problem of violent extremists. charlie: do you think they want to be a european power? jake: number one, putin wants to do something he said publicly. he would like to reconstitute the sphere of influence that was the soviet union without necessarily fully taking over

those countries except in cases like -- charlie: if you talk to him he'll tell you about all the number of russian speaking people behind the borders of countries that used to be part of the russian -- jake: but he is perfectly prepared as we saw in georgia and ukraine to use military force to advance this objective. that means central asia. it means the caucuses, armenia, georgia, and eastern europe. it means members of nato who he believes rightly belong in the russian sphere of influence. and i have to say, he has done a very good job of kicking up dust about nato expansion. you made me do this. charlie: you threatened to go and make georgia and then ukraine a member of nato. jake: or even less than that you -- or even less than that. you added the baltics. charlie: was it a mistake to expand nato? jake: no. if we hadn't expanded nato to the baltics and just play out the reverse counterfactual -- charlie: there would be no restraint for him. jake: or to poland or to hungary. what would be happening right

now or over the last 20 years had we not done that? you can see his aggressive tendencies toward countries that do not have nato membership. i believe the fact of the article five guarantee to these countries is what keeps stability and avoids war in the peninsula, and the idea that somehow this has made him do it is a new argument. he didn't make this argument in 2005 or 2010. he started making it when he came back -- charlie: the russians have always had a great concern about their border appeared that is in -- their border. that is in their d.n.a. after hitler and napoleon, there was always a sense of there are threats coming across. jake: right. in the obama administration, we dealt with this issue of the missile-defense system, which we were setting up to deal with iran, but they felt we were setting up to deal with them. i don't deny that. charlie: which is an interesting question. how difficult is it in these kinds of negotiations, having dealt with the iranians very closely, to speak to the fears of the person across from you, and make sure they know you understand their fear?

jake: it is an incredibly good question, because i think what most people don't understand is that a huge amount of diplomacy isn't bartering or trading, it is just trying to get on the same page. a common picture of what is going on. what kind of threat you represent. what kind of opportunity you represent. and that means hours, days, we would spend with the iranians trying to explain to them that we weren't trying to engage in regime change, that we weren't there just to try to topple them, that we legitimately believed and did not think it was a pretext that they were seeking nuclear weapons. charlie: if in fact we could convince the leader of north korea that we had no intention, and secretary mattis has said this, and also the secretary of state has said this -- no intention of attacking you. if he believed that, and we could make him believe that,

would he be less enthusiastic, because he would not look at what happened in libya and in other places that he sees as a reason for having nuclear weapons? jake: it is an interesting tie between iran and north korea today in answering this question. because no matter how many times we tell him, we don't want to change, topple you, we're not trying to take over north korea, what he sees is members of this administration actually talking about regime change in both north korea and iran and talking about a deal that was cut with the iranians on their new -- charlie: it is not mattis, not the secretary of state, not the president. michael flynn may have talked about it. jake: what i think, an unsophisticated observer of the american politics, someone who doesn't look at it closely, could pick up a body language that says, "yeah, yeah. they cut a deal on iran but we don't think we have to abide by that, and by the way, we'd like

to get rid of the ayatolla." to pick that up and if you are kim jong un sitting there right now and that is basically the policy direction of the united states, why would you ever believe when someone comes to you and says we want to cut a deal on your nuclear program that that's on the up and up? charlie: do you think there will be a regime change in iran, that the present theocracy will be -- we all know there are a lot of moderates in iran. jake: yeah. charlie: a million went into the streets after the election. jake: i think the current set up in iran where the will of the people is consistently suppressed, where the rights not just of minorities but the majority of iranians are abused, is not sustainable over the long term. i think democratic change from iran has to come from within. charlie: the same thing about the chinese? can you put the same test on the chinese, it is not sustainable over the long term? their fear is something will happen which would take away the power of the party to control the state. jake: right. and xi jingping is heading into this 19th party congress at the end of the year with this notion in mind. the number one thing he has to

worry about is maintaining party control and putting his own personal stamp on that. in the 1990's, we made a bet when we brought chinese into the wto. our bet was over time as they liberalize economically they'll have to liberalize politically. that was the bet, the proposition that underpinned a bipartisan view of china at that time. it's been more than 20 years. that has not happened yet. do i think the laws of physics continue to suggest the trends in that direction? probably, but i don't think anyone can say with confidence today that there is inevitably going to be a change in the system of government in china, because they have defied expectations for a very long time. ♪

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♪ charlie: do you see any weaknesses in that government, that might make them less of a power than we imagined them to be? jake: china faces huge internal contradiction. charlie: beyond pollution -- jake: dramatic internal contradictions related to the aging of their population, the urban/rural divide. the fact there is still rampant corruption. the fact that as chinese people become middle-class, their expectations go up and their demand to be treated fairly and efficiently and justly goes up as well, and this system may not be able to keep up with that. there are a lot of arguments one can make. charlie: there is an advantage as people become part of the

middle class, and it provides a market so the economy can grow. that is exactly, as you know much better than i do, how they've turned the economy around. rather than let's not export stuff, let's sell stuff to our own people who can now afford it. jake: unfortunately and the chinese may be able to navigate this turn effectively, it is very difficult to go from a state-owned enterprise, corrupt oligarchic system to one that is sort of a genuinely free market model without going through some massive economic turmoil. charlie: do they still demand that our tech companies that come in give up some trade research, trade secrets? some of their technical secrets? jake: even where they don't, they tend to find ways to design joint ventures and partnerships where they benefit from the intellectual property of american firms. so, it is not the case that every american firm going over there has to hand over the keys at the beginning, but the chinese have become very sophisticated at being able to extract the learning and

knowledge from american companies, not just tech firms, but across sectors. that has given them really profound advantages both in the commercial space and in the military space. charlie: how and where will history judge the obama administration severely? jake: i think the area where we were least able to have an impact, where we probably could have had an impact, was in syria. charlie: doing more earlier? jake: doing more earlier. now, i would actually argue we'd had to do it at both ends. there was a huge gap between our means and our objectives. we said assad must go and then we really weren't prepared to do much to make that happen. there was this yawning gap. charlie: then there was isis. jake: to close the gap from my perspective, we had to both increase the means, the degree to which we were engaged to try and shape circumstances there , but also become more realistic about the ends earlier on to recognize that having assad go right at the start wasn't going to work. that you had to have a diplomatic process. i think we came too late to that.

charlie: and coming in earlier would have meant what? jake: for one thing, early on in the conflict, the opposition had much more battlefield momentum. they controlled larger portions of country. the russians were not yet fully engaged. the iranians and all their proxies were not fully engaged. the choices facing both assad and his backers were sharper in those early days. charlie: well, he was tottering for a time. jake: right. so it would have meant at that point trying to get a diplomatic process going. the end result of which would have been a transition from made, but would have not maximalist demands of the beginning. charlie: talking about terrorism, even after we overrun and retake mosul, there will be and isis ii or an isis squared or something. what do you think the future of terrorism is? because there has to be a concern, people thinking about the future. jake: it starts with understanding exactly what the problem is.

as you were just saying, there are 25 million sunnies who live between baghdad and damascus. two iranian dominated capitals. they feel disconnected from their countries, disempowered economically, and have been subject to this relentless , vitriolic jihadist ideology for the last 15 years. we knock them out of mosul, out of raqqa, and they scatter to the winds, but they are going to reconstitute because of those factors unless we figure out a way to get the iraqi government and a syrian political solution to give them some hope for the future. i believe that is more possible on the iraq side right now. that if prime minister abadi wins the next election, he has shown his willingness to reach out and deal with the sunni population in iraq. i am much more concerned about the future of syria. i think what we are doing right now is only focusing on raqqa , and sort of leaving the russians and assad to do what

they want to do and the net result of that -- charlie: in terms of the civil war. jake: the civil war, safe zones, etcetera. i think the net result is going to be the re-emergence of a jihadist force inside syria. that is why we cannot simplify -- we cannot simply fight isis in raqqa. we have to think about syria diplomacy as a part of our counterterrorism strategy. charlie: you said two things that interest me in terms of what you have said. you say a lot of things that are interesting to me and i quote you. "my core principle is the fundamental project of american foreign policy over the next two decades is to secure and sustain american global leadership, because i deeply believe a world america leads is a world where everybody ends up better off. certainly where u.s. interests and values are protected, but where the interests and values of our friends across the world are also protected. for me, that's the cornerstone." my question is, are we losing that leadership and that respect around the world? jake: it's hard to answer that question other than to say, yes we are.

charlie: and you measure that by the reaction of g20 when we got out of the paris accord. you measure that in what other ways where the world wants us to lead, wants us to act, and we're not acting? jake: the second big area, a g20 was a decisive moment where you could see the united states was on its back foot, was not the central player, was not driving the agenda. was not shaping circumstances. so that is one. when europeans talk about the leader of the free world now, they talk about angela merkel, not donald trump. that is the second example. third, i think in the asia pacific right now, even though north korea is a critical issue and we have to stay on top of it, our entire asia policy is essentially a north korea policy. to the exclusion of really focusing on almost anything else. as a result -- charlie: remember, president obama said to president-elect trump, your biggest problem is going to be north korea. jake: and it is. but we can't only deal with north korea to the exclusion of the rest of the world.

charlie: the nature of being president. jake: or the rest of the region , particularly as consequential as the asia pacific. just to give you an example, right now, chinese and indian forces are a hundred yards away from each other pointing guns at each other. the possibility of these two major economies going to war would have dramatic impact on us. we are not paying attention to that. the chinese are continuing to expand their influence in the south china sea, which is a strategic waterway for the united states. we are not paying attention to that. i think you can see in a lot of different places where we aren't leading. i will say this about american leadership, because i think this is very important. while i believe the united states must continue to lead a rules based global order, i also believe that we have to think about that leadership in a different way. it doesn't mean we call all of the shots. it doesn't mean we absorb all of the costs. what it means is that we build coalitions to solve the big problems that we face, that no country can solve on their own, but that the united states of america has to be a part of solving or it won't get done. that is what i mean by

leadership. it does mean a larger role for emerging countries and for our allies and partners, and our leadership has to be directed, just to tie the two parts of the conversation together, at solving the core problem that america faces, which is how are we going to have an economy that works for everyone? if we can solve that problem through more principled, effective global leadership then we will have really delivered not just for our people, but we will have delivered a model for everyone. charlie: we do live in an interdependent world. the fundamental question, the touchstone of everything is whether a policy is going to contribute to strengthen the middle class or to hollowing out the middle class. that is the question that i ask more than any other domestic policy. thank you for coming. a pleasure to have you. jake: thank you for having me. i appreciate it. charlie: jake sullivan for the hour. thank you for joining us. see you next time. ♪

♪ anchor: welcome to "best of bloomberg markets: middle east serco -- east." a possible easing of tension in the gulf. iran says it may engage in a diplomatic exchange with saudi arabia. we look at the possible implications for markets. taxing times in the uae. new excise on tobacco and soft drink will start from october, the first in a series of reforms designed to make up folo