growth at this point. at least that is the role that ideal he each can step up to. but there are some really big questions on everyone's agenda regarding our relationship to this point. how are the global economic and financial systems being restructured, and what will the relative position of the u.s. and china be a couple of years down the pipe as all the cells outcome and to what extent will the operating principles of global economy have changed any significant way. because of the fans in the last several years and how we work our way out of it. are we and the chinese going to manage our interest in the way that contribute to open trading and investment regimes? or will we end up in a position that has created new obstacles to the free flow of goods, capital and know-how? and will the global economic and trade issues become a source of growing mutual trust and strength in the u.s.-china

relationship, same basic question we've asked about the nuclear, nonproliferation agenda and also earlier about the climate change agenda. or alternatively, is this an area that will be creating new bridges and new levels and distrust between the two countries? we have two wonderful speakers to address these issues, and others that they may choose to add. and craig is professor of economic right next to it. she actually is deal a fellow of the center for international development stanford university is that correct? yes. she has held a series of very important decision over this including the first deputy managing director of the international monetary fund for five years. a little earlier in this decade. she spoke a distant which fell on past president of the economic association.

barry bosworth as i'm sure you're all know is a senior bowl and long-standing and economic studies and in global economy and develop at the brookings institution. he is also the chair in international economics at brookings. i love the fact that he received his ph.d from universithe university of michigan, which plays rise in the last quarter-century a more. clearly great quality. and as in the previous panel, the first few presentations and it will open up for q&a in the end of growth presentation. anne, if you like to to begin please. >> thank you. subject to china, u.s., and international economic relations is already a broad one as i think of that as i try to take on the questions that you said, to the audience here until midnight. so i'm going to be somewhat briefer than that. the two big issues by laterally

and u.s.-chinese economic relations, which is where i will start because they lead into the global, have basically been a large, i don't know what you call the chinese -- on the one hand, and out of that the u.s. has chosen to raise very strongly the issue of the chinese exchange rate, as because of the first issue. and there's been a lot of pressure from that and a lot misunderstanding. there is no doubt that china's trade has grown rapidly. china is the new kid on the block in the world. it is estimated that it is not this year, then for sure next year china will have the number two spot in world exports to nominate and current exchange rates, as no more purchasing power anything. just number two in a a world in exporting and growing very rapidly. whenever a country is going very rapidly there's always some juggling of shares and that always leads to some problems. but in this case the size of the

current accounts, the speed at which has come up has been an issue. but i want to back off just a bit and talk a little bit about why the issues really are multilateral and not bilateral. and why in fact it will probably be desirable for everybody, including the chinese, americans and the rest of the world, if these were not regarded so much as bilateral issues as they now are. in general, most issues have spillovers to other countries. trade and exchange rate issues probably have about as much spillover as you can think of. let's think of argument imagine the u.s. did something very punitive with regard to import and this will cut them 50% or some such. the u.s. doesn't have the tools to do. it's illegal. i'm not suggesting, it's a mental experiment, okay? let's imagine the u.s. is okay. they have to go down by half. among the things that would happen would be a lot of things

that were previously coming from china would anyway come in from countries such as korea, south korea, from india, from thailand, from malaysia come from indonesia, from australia, from japan, from taiwan and everywhere else. trade is a multilateral in so many ways that it is hard to think of how you do something by laterally, and yet much of what has been the focus in all this has been bilateral. and that i think has been a big mistake, both for the obvious reasons that is not going to go and it is not a bilateral problem, but also it's been very ineffective and it is indeed because of issues that were raised in earlier sessions, chinese nationalism, chinese decision, the chinese once again are likely to react and say hard to believe that indeed this is something the u.s. is pushing us in because the u.s. is unhappy with china's economic success that's i think they're a whole friday of reasons it is not the

way to go. trade is not a bilateral thing. the history of economic sanctions in the world isateral failure after failure after failure, but even wanted to ver small countries do go along because they become the onto route before it takes very muchy universal agreement and what have you before anythinghich happens. so the argument for multilateralism is trade each agrment that takes into my first sort oa global issue, which is related tht not quite exactly the same thing as what kind one was saying. and that is among other things ast is not happen in the past year and have and should, an important one is that has beentr no serious definition of u.s. ldou trade policy going forward. and most i importantly in thatus regard there has been since 200a a doha round trade of negotiations that still legally underway where, from about, sor, from the summer of 2008 but evet before that, the round was held

up waiting for the newt is initiation to di ug ndoerut what wanted to do with it. there have so far been veryheldg little signal on that, and so ao the moment the doha round which would be the best way forward on these things is at annt, the impasse, and his leg to all sorts of things, including more protectionist reactions from a countries. of and that's independent of the te current financial situation rongh, of course, is making it a not as muchworse but worse as i would have expected.s financeath everythingte i would argue that taking the issue of s the chinese current account the u.s. deficit at a comeback back animate because it has ahe macroeconomic dimension which ie very important, taking that.s. multilateral and not tied to handle this on a bilateral basis would make economic sense. would also have a chance of success which a bilateral deal does not. and in other regards as well.haa it would be perfect. but on top of that, we had an tope from about 2003 onward

ve anwas widely discussed at least by some at the global level which talk about global ta bybalances. global imbalances would argue that the very large u.s. current account deficit which is you know got up to 6% of gdp was toy large, was not sustainable, andt the current account surpluses which first came mostly fromabl china with a few other countries and their with the oil export as well, that is global imbalances source of major difficulty for the world economy and were unsustainable.se globa the imf actually did buy this wd despite the fact no one remember that, then managing director ofa the imf called for multi-latera consultation with a view to bringing together the surplus of countries in a multilateral forum and to geth just a few key players, six wass the exact number, and have thema w key as to what thel prom was and what measures each would take in order to try to resolve

the problem. there were meetings held in a but agreed on the project was no disagreement whatsoever but thap had to be resolved. and disagreement was of course hard to be resulted should it be the deficit or the surplus country? the united states but should be the surplus country and the oil exporters and the chinese but ir should be the deficit country.o? there the matter stood. now what happened subsequent -- bdeath ust say the large at hent account, deficit of the united states in able to or was a result of come and i won'tacct argue which here, very low real industry in the states.es and much of the rest of the or t western world. those low real interest rates rt according to some including me were a very major factor in could tip into the financial so, crisis. i re a vas the way that signal it was a unsustainable. they certainly encouraged itasing, carrying trade. they should encourage or makevey cheaper to develop a more rapidd development of the various

derivatives and hedge funds ande so on that everybody is now so at.lopm okay? so f so balances were unsustainable and as it happens the way they blew up was to the financialgloe sector. and global imbalances were realt wasthey were real underlying causes, namely these big surpluses and deficits, intoere major parts of the world.plusesd with all of that, we have now seen a situation where china's current account surplus went down somewhat. have the current u.s. deficit is down somewhat but there is nothingh'' that i know of and nothing tooma anybody that i know oft and knof that is to prevent it from b happening again to as the world economy picks up it is certainly likely that u.s. imports will rise more rapidly than experts, especially with the recent dollar appreciation. it is more likely when the u.s. picks up that china's exports e doth theecent and with all that, if nothing else goes wrong in the next fivu or 10 years, of course it may, even before that, we are likelye

yeaee under the global imbalance and anorsther built ae this is not a china-u.s. problem. it is a l global problem. it is as much in china's imbalaa interest as in tndhe u.s., but t is not a bilateral probit and pm therein i think what lies a difficulty.'s inrest a because the china here's usn yom should a change your exchange ae china is certainly the biggestod academy of other problems ahead of time thatchange might reducea china savings at right now, is a different right now. china's consumption of gdp is ceptedabout 40%. 40% is a very low number, and know. rrent account surplus of course the difference between investment or expenditures andt- income and so china is saving for domestic investment a lot. but even that has a lot lefttur over current account surplus.chs the u.s. is doing the opposite. investing a great deal more th'

we saved and financing of course china. i given all that, the question is what can be done. and thed answer is there does need to be some kind of global t regime to work out a mechanism s whereby we get realistic numbers out aechanistainable current account surpluses and deficits get cannot last. that's not an easy thing to do and it won'tso that be simple. for all we know china with a demographic changes coming in oo for ls coming along may not any longer be the savior of the future.na, demogrsome other part of the world that will be saving hugeap amount. e future. n go back to the united states that it doesn't of matter. appointed the world is not have am a regime right now to do thisth and yet discussions don't progress because we're focused on i think the wrong issues. that as in the exchange rate, chinese exports are about 25% of their gdp which is large.he exce but the 2.5% of chinese imports,

psycho 2.5% of gdp. 2.5 present only. to the of is, 2.5%. only. with that, tells you that even if we cut them in half we have to change 1.25%. you the trouble is in coming from. all of the jobs and nothing else are evident. the chinese fact i economic impact is global and is their large savings, not their exporte to the united states per se. savings may fall as a% of gdp. s they won't fall absolute, but, of course, chinese huge. and as it grows everybody knows. we need to strengthen the exportateral trading system for its own sake because it's goodts for growth of everybody, necluding china, including india, including the united states. we need to find regime so that we cannot get back to the unsustainable global imbalances that way we had it. but most of all we have to do ic in a multilateral and not a

bilateral fashion.he way w so i would argue that the issuee between the united states and china are not the big issues between the united states and china. they are global issues.the big s they're more important than either country own. they cannot be solved by eithers country. one of the b interesting thingsn in 2005, the united states wento and said okay, we can keep of these current account deficits. we're really going to changee mm ofite a profit. cut-st go policies so we will cut down our expendituresng relative to our income quite drastically, and so we are going to go and the balance brick with big of health and the rest of ir the would have done asanything there would have been one very big world wide recession.if and as the chinese have decideda to cut down without anybody else doing so, we would have quite a bit of inflation. there needs to be mechanisms --d needs to be a mechanism that can work for both sides and both sides are desolate the same countries over time. one of the interesting things to me is that much of the rhetorico

about china now is, entrée, andf exchange rates, is not thatmucho different from what we heard cha about japan in the 1980s. in the 1980s japan was the new t kid on the block.t and everything you heard about american manufacturing going wrong, was to install, 1980's, p everything there to the japanese were saving too much, in their u.sent account surplus, et cetera, et cetera, et cetera. what happened to japan wasn't're very pretty but it didn't happet because that discussion. it happened because the issues in japan were installation and things like that they caught up e th him in the 1990s.e rjan ol we know the same kind of thing may happen to china.caught but that's not the issue that the in th issue is define a glod regime so indeed we do not have theappen kinds of imbalances the had.o find let me at this point stop thered you'd want to into the global t financial crisis, if such another topic, i don't care to the start because i would know glob where to stop and give barry a

chance. >> thank you. i think i'm going to end up repeating a lot of the same things of anne. but i wanted to get a little bit ings. rom the u.s.-china perspective. the first point i want to make is that surprisingly the from economic crisis has been good for china, i think, on balance.e one reason is it simply has nota been part of the global financial crisis. the financial system that many people were so critical aboutis was helpfully closed during thiy about. therefore, largely unaffected by the distractions and the rest of the world. negative shock to china was the trade mechanism.n and so the was a very powerful thstortion of trade, but china's response to that was a big same as program. i think the other point aboutseh stainless program is it was amazingly successful. china's stainless program wasbot much more successful than the

american one. mainly because the speed with operate. thed begin to as a result of china had a very modest slow down in 2009. it has come out of the recessiot with basically no worsening of its structural economic9 and ha conditions.he receson but the second thing, i think,ng that's happened that getsructur overlooked a little bit is that the financial crisis was a very helpful in highlighting for china the risk that it can't by its past economic policy. of too much reliance on export surplus let economic expansion, surpthe exposure to an unstable sirld economy as compared to exn china's policies, say, before 2004, 2002, which were much more domestic growth oriented. i think was a warning to the domest-growt they needed to back off from this excessive emphasis on export growth.

looking ahead to 2010, i think you now see china back on the path of about 10% a year.hink yo pathallation is one concern but still the projections are that it will stay in the range of about three to 4%. but they are worried about a realis one estate bubble, and tf playing the consequences of accelerating world commodity estate prices. but the other thing is china has no significant difficultceleratc problems. step levels are extremely low, dollars basically in the budget. what it does need to do is shift its monetary policy now that the standards requirements are overn and it relied so heavily on a monetary big explosion of lending.ulus it's now going to shift monetara policy back towards the street. but i think which are also seeing is the emergence of an impetus on growth and the domestic economy.re seeing the particularly on emphasis on promoting growth in the westernh articulas as opposed to theei

coastal areas. second, i think and except as it appears of urbanization is an inevitable part of economic growth, and it appears the government will quit resisting as it has in the past.tion as a lot of the urbanization measures. and i think the major domesticqt problems resisti that they havet getting balanced economic growth is the households, although ilem know other economistsconomic owh characterize chinese household econigh savers, to me the data seggest they save about the same percentage as the japanese did in the 1960s, and the koreans in 1970s and 80s. high-growth economies, people save a lot because their incomed has gone up so fast they can't h-igre out how to spend it. the same would happen to us if we could only have a rapidly growing level of income. they of the problem for china is thah grt very much of the income getd to the households. they will be perfectly willing to spend it if they could get their hands on it. the trouble is that the

government and the enterprises or the corporate sector drains off of enormous proportions ofge sector drchina away from the household sector. and so although we see 10% growth in gdp, we shall relatively slow rates of growth in household incomes. and they've got to figure out a way we see 10 to get money intos of household either throughth reform of dividend policy or tax policy in the corporations. but i think that's the biggestis challenge, that they want to a policiic restructuring, they have to find aes way to promote the household sector as being more significant in the growth process.re from the economic relationship of the u.s. and china, as we gon fromd and we are going have a guest a meeting this month, i think the major focus will a become and i i agreed with thets two countries have to rebalance their to economies. and this is something on which they should be able to cooperate

closely, and as kind tos somng w emphasize, cooperation betweensd the two outliers in the global system to reduce their extremes should be very helpful to the to world economy as a whole.he glot so china hoas to move towards greater emphveasis on domestic o demand, particularlye. consumption. toreaternited states has increase saving and move towards greater efforts to export. stes incrher was interested in this particular is his, but now thats the crisis is over, or seen the crisis. f the, we are both theemely interested. and so you see china much morers interested in trying to promote domestic demand and produced this relies on this unstable in try westerners. and i agree completely with anne that a process-- of working thil out, theot - major risk is a rey out,s. and japan on productive relationships from discussions from the last time we had a dialogue with another country. maybe because both of us are frm

with anotheriased strong memories of that. to me it sounds just like a déàa vu, that if i took all of these undsmns in the "new york times" and other places and change the name from china to japan, it would be a perfect replay. of th and i think that is a major threat that we threat in doing r is comek but that is the bomb io an important one, and something we should find a way to a yee basi to. i am not so convinced i guess that multilaterally we will evet do anything. multilateral meetings tend not to be very productive. so there's a lease andng. opportunity to track this on amr bilateral basis to see whate. happens that both countries cant maybe deal with it better. b e d sek china worries mainly, what issue for them is what's the value of the reserves going forward. ssue fore a team led an amazing amount, they have learned as if could idea to hold it in and euros.e they got a lot of them in dollars but now that we were

about the decline in the value of the dollar. use either efforts to promote ofme system, like fdr's. i cannot say it's not going toir happen. because what they really want is to fix the exchange rate within that kind of the war and then i going to get fixed exchange rate. ou have got to it about the changes in the price of the. and you can try to diversify your risk of what you think china can make some progress and by not emphasizing so much the dollar. but as long as they got large international investments they have to worry about the value os them. long i think and agree very much wit, anne t that it is a mistake for united states to focus on the exchange rate. the reason is, what we are to bn worried about its trade laws pick a spot a connection betweee trade rate and trade so that dealing with a country like china with all of its other distortions, there'stn a slit between those two. with of

the united states is unlikely to get some movement on exchang's a rates and progress on trade.the that's that what we should be interested is in.gress on so i think that it's also important that the u.s. realize, we don't compete with china. if you look at the things we produce, and web an imperative't advantage in, china does not produce them. at th we compete with japan and the e.u. what we ought to worry about is what happens to do is exchange rate vis-à-vis those two countries or two regions.pens and we also should be interested in is improving our access to in the chinese market. with those a market, because it's a growing recognition in u.s.imprr that's very important. in terms of the exchange that i would think mexico and vietnam would be fighting much more oves what the chinese exchange rate ought to be because they're more directly affected. not the u.s. the other thing is, thus far

this year there's been a little bit too little appreciation of how much adjustment has occurred on the chinese side.apprec the current account surplus speedway back in 2006. declined sharply in 2009.the cun was down to about 6%.06. china has now released its trady data through the first four quarters of 2010. it's running at one-fifth the level of a balanced that it was ads in the first four quarters of 2009. first four months, what did i say? i'min sorry.four quarters of 200 months. the chinese exchange rate has also now over the past two years increase quite a bit relative to the left. when you look at it in the real exchange rate, that is adjusted for inflation, basically the u.s chinese exchange rate and the american exchange-rate departede several years ago and are now moving in opposite directions.cs

they have altered the relativeed relationship by about 25%. in so china is facing a rather substantial increase in its real exchange rates in recent years, china isu.s. in the midst of exch depreciation.eal i would share the concerns that the current situation has exaggerated those adjustments, and maybe it will explode in the future. but the point is, so far thisose year china has made a lot oftur adjustment.but the growth is domestically lead, we now know in 2009, over six percentage points of the growth i gdp came from consumption.hat that's about 60% of the total. so china has moved quite a bitsn in the direction of relying more on domestic demand. tot there was a lot of infrastructure spending. in and i think the major questions with all of this is simply, cano china sustain it? but we don't know the answer toh that question, but i think if you just are what have they don'

anything, the answer should be yes, they have. in contrast you would think okay, the united states had tobh restructure on theey other side, right? and so what we balancing have we undertaken as a country? well,th the united states has bi struck in a deep recession.aken? the trade balance has improved, not because we're doing better but because her in porch collapse more than our exports'i [inaudible] >> and oil prices are down,orts although headed back up again it would appear. but the united states also, for the first time in history, nowed has a negative national savings rate. that is rather remarkable that we now spend more than we earn. and the only reason that we earn. have an explosive problem on the external balance side trying to finance such athe only situation is that domestic a investment has fallenpr only 2%s dtional income. so we now turn into a country 2 that's got negative savings and

extremely low rates of domestic investment. the combination of those two, so far, keeping that our borrowingf requirement.hose two is economic growth has accelerated in the message in recent months and i think would be much moreem optimistic about 2010.cceled but a forcefully is because we all return to the habits of the past.bout 2 we're back on a consumption binge again as the household savings rate has fallen back to where it was before the crisis, and basically our economic recovery is being led byas consumption. economic recovee actually led byed in the firsryt part of 2010 and appears to be going in the wrong direction. i think the biggest is for the united states at the present time a wide will want to export more? we have to, otherwise will not be able to create enough jobs. we can't go on as an economy anymore with a really strong domestic consumption where we can afford the type of trade anymorwith shave in the past.

so the u.s. has to move back toe a more balanced economic situation where exports are growing rapidly and exports and imports of being equal. and i regard it seems to me one promising area of the world what we're doing better is china. sense compared to 2009 a year have doubled to china. year our imports have increased about our or so over that same period. abouldn't be too happy about it because you should realize that our export to china are be historically only about oe-fourth of our imports to china. from china.nly so we have a long ways to go in terms of the village respond on exports i, the improvements has accident to asia and we do seem im be doing better on the export side.

goining ahead, what bothers me about h baving a discussion with china on this issue of ourhat be economicrs relationship, i think it's important for america negotiators and americans to keep our focus on jobs, thate ultimately the objective is tort increase u.s. exports but i'm a little distressed to hear all the discussion of improving business conditions in china. i'm not that interested in whether or not american firms can do business in china. i mortgage did in whether or not americans can export to china and that's not the same thing. just the fact that american service companies can operate freely in china does not translate into a lot more jobs in the u.s. lead to make sure get access for capital goods, which is the biggest area of specialization

in exports. i would hope we would keep our focus on those sorts of measures and changes that would influence our access of american exports to the chinese market, not just american business and the chinese market. thank you. >> thank you, both, for raising a substantial array of significant issues and restructuring a lot of what the popular discussion has tended to focus on. the floor is now open for questions and i see a bunch of them. as with the other panels, please wait for the microphone and briefly headed the fire itself and focus on a question rather than a set of comments. >> i'm from the german you seem to be in disagreement whether it should be bilaterally

or multi laterally and my question is if there was a multilateral mechanism should it be with the wto, what would be the chief of the mechanism? should there be a wto resolution, will there be sanctions? what about exports? i see the point that exports need to be increased but the question is hall are they going to be increased? >> the macro in balance, the current status is pete dirksen senate office building 0 expected macroeconomics projections from the major countries and work out how they will be consistent and peer pressure is supposed to bring things into line. i believe peer pressure may have a chance to work but i would not

put great faith in it. there are alternative mechanisms that could be used. so far there is no agreement on them. my own instinct would be i am f. the wto has a trade organization, just trade negotiations. the imf has done much better in terms of looking at macroeconomic consistency and the projections. the most recent evidence comes from your part of the world as the europeans had to call in the i m f to do the back row. they have enough strength that i would look for it. be more important point as you recognize was the one with regard to how you get sanctions right. that will take more work. it is hard to get agreement to get enforcement.

i am less concerned with exporting and more concerned with getting the saving investment balance right. that will move in the other direction. president obama has agreed to double exports by 2015. the instruments and policy tools with the incentive to do that. >> i would love to do a multilateral meeting if possible, but i don't think countries are willing to give up sovereignty over these issues like budget policy. the idea that other countries dictate your budget policy unless it is a crisis where you have the only source of money, i don't see that happening.

we should emphasize for these two countries because they are so much the outline. it is their own self-interest to do this correction. china has made more progress in realizing it is in their self-interest to get away from this overemphasis on export surface -- surplus led growth and check the domestic economy than the u.s. and the issue is complicated because normally i fully agree. the issue is saving and investment. i don't think you want to say 8 invest less. you have a savings surplus and connect for it. we are currently in a highly depressed economy so it is not true that you have to increase saving before doing something to expand exports. the biggest barrier to u.s. exports at the present time is price. the dollar in that sense is

overvalued. i wish americans were better at exporting the long tradition of ignoring issues like exports, we are not particularly good at it. the only way to increase exports is to cut the price. i would expect to see the u.s. exchange rate audit depreciate in future years. i think that is exactly what was happening before the financial crisis. the dollar fell and in the midst of the crisis everybody had a rush to treasury bills and that drove the dollar back up again. this is an issue on which we would like to have a population exchange between the united states and germany because germany is good at exports but the united states is not. it is mainly in the short run a question of price. i fully agree as we go forward from that, than the u. s has to increase its national favor as a way to continue to finance this kind of recovery but right now

we have lots of resources to export. we don't have to cut consumption to export more. a few years from now that may be necessary. >> jonathan back here? >> this question is more to barry bosworth but really both speakers. you emphasize the importance of export but to what extent if there were modifications in u.s. export control strategies, permitted technology limit, how much would affect that picture which seemed to me intuitively that would certainly be one way of boosting what we sell? >> that is a very good point and we go in the right direction. it is really small. there just is not very many commodities where the united states has that big a

technological advantage. what we call high-tech in the united states in our trade statistics, we are a deficit country in. it shows up as both china is the big exporter of high-tech products. that is not true. apple computer in particular as and ipod, and iphone and and i pad. all designed in the united states. not a single thing produced in the united states. they are all produced in asia. they are labeled as coming from china. china at -- they are the assembler of all this stuff being made in taiwan but principally in south korea. it is a good example of where apple computer plugs into a global production network and unfortunately we are not really part of that production network anymore because we don't seem to

have much of a comparative advantage in the production of those products. what you suggest would go in the right direction but it would be a relatively minor -- >> on the u.s.-china trade balance if i could interject something, our imports from china are imports from asia. more than two thirds of the value of those imports are assembled in china but exports to china our exports to china. very little of that is exported out of china so we are comparing apples and oranges when you look at these. please wait for the microphone. >> richard harris from private equity new york and my question is for barry bosworth. you made the comment that no country is going to top the restructuring of its deficit imbalances but may i pause at the point that that has already

happened in george thibault even though that is not germane to this discussion and the i m f coming to the rescue, markets said we don't believe you can restructure your debt through internal processes. what is to prevent the bond markets and people from making the same conclusion about the united states and great britain? >> i thought i would follow that remark by qualifying it saying george thibault was an exception. the u.s. in the long run, this policy of running these external imbalances year after year is not sustainable. we all agree with that. it is in our own self-interest to make a correction. mainly the argument is about

how. one way to do it is weight to have a crisis and you have to and the lot of countries who have done it -- they face an external crisis. i wish the united states would do it before a crisis occurs but you may be right that we will refuse to act. but it is a much different case. the u.s. is a huge economy at the center of the global economy. i don't know how that would play out. i do agree that the u.s. ultimately has to make the adjustment. the only analogy i would give you, the children of john d. rockefeller have been living off of his well for over a hundred years. they haven't run out of wealth yet. you could argue that is what is going on in the u.s.. we are an extraordinarily rich country. we have been selling off assets and issuing debt to the rest of

the world for 20 years now with no sign that we have run out of that yet. they seem perfectly willing to buy our assets. that is what they do. they bosh our assets, not our debt. we are more characterized by a country with a lot of assets in the united states rather than pushing by the debt. china is a big exception. china buys our debt. everyone else buys our assets. we will see who turned out to have the best deal. >> back here again. >> a follow-up on the greek question. whether the potential impasse of the greek prices on bailout to asia and china particularly on the policy front.

will that make china's valuation on interest-rate easier or more difficult? >> china and asia in general has had a good crisis, most of these from the banks because they were not involved in holding much of the toxic assets that were part of the trouble and they were able to have a fiscal stimulus because they did not have the high levels of debt. i don't see why east asia or asia in general would be any more effective if the greek bailout is successful. you expect europe to grow faster and it is good for europe and of the rest of the world but it is not a big deal as far as asia is concerned as far as i can see. >> back here?

right there. >> question for both of you. the reason for every nation -- my question is this. would you get around town? talk about us and china. i want to talk about the u.s. now. we maintain strong currency and the trade rate. this already is and sustainable. what do you think two things are? do you think the current administration -- making a

change for u.s. efforts, sustainable future and poor country -- wine not all of this as deposit to improve their standard of living? thank you. >> i will take a crack at a couple of these things. i am more extreme than anne frueger on the trade. fast-track have lapsed for the united states. i think it is unacceptable to the rest of the world to negotiate trade when the united states does not have fast-track authority. probability that this president can get fast-track authority out of this congress i would put close to zero. i do not think trade negotiations on a multilateral basis are likely to move forward

even though i fully agree that any other basis has been a disaster. a lot of the problems are precisely because people do it on a bilateral basis. on the other hand i think the international trade system has held together amazingly well in this current crisis. they really did try to adhere to the g 20 prescription of minimal trade restrictions. our country faltered a couple times but nothing big. and the strong currency, i hope our government officials keep their mouths shut about they want a strong currency. i think that is ridiculous to express any opinion one way or another on that. i would like to see a weak currency. i also realize that doesn't have

much weight. political will, it is of little premature. right now in the united states the focus of the politicians is on a single event. getting the economy growing rapidly again and getting unemployment up. they put up the issue of rebalancing as something for the future. when they get their, will they do it? i don't know. in the 1990s we were fantastically lucky. the cold war came to an end, saved 3% of gdp of the defense budget and we had an economic boom that raised tax revenue and attacks deficit just disappeared overnight. we were not content with that situation so we brought it back. when you say political will, the

u.s. focus is on increasing aggregate demand and the cornerstone of that should be a very strong effort to just promote exports. that is one of the reasons that is the key. i am convinced we won't get back to full employment again unless we have a much larger share of gdp? >> those that require government action? >> only in the sense of something that would lower the exchange rate -- otherwise no. although i think some of the countries have policies that are very effective in increasing -- >> the investment in infrastructure and other policy options are sometimes associated with that. >> i don't think our ability to export is inhibited by our infrastructure system. i just think that american

companies don't really care about exports. if you are going to do business overseas they would rather just move overseas and produce abroad and sell abroad. they won't worked for the exporting out of the united states and a lot of other american companies don't want to bother with exporting. they have a big market at home. for 25 years they could sell everything they got their hands on in a fully employed domestic economy. we are now suddenly very interested but it is not so easy to generate interest and skill in exporting. >> the tendency toward bilateral and regional preferential trading arrangements has already caused some countries to face them more acutely than others but i am convinced -- i'm not sure when or how some major

difficulties, complications from the eruption of the bilateral and preferential agreements and at that point there will be recognition that we get back to some multilateral disciplines. >> this will have to be the last question. that dropped hands like a rock. you can always count on an admiral to step forward. foreign-policy analysis from this day a few months ago we heard a chinese economist argue since china was switching to domestic from the export market we ought to get involved. you seem to be arguing against that. are you simply saying we should give more attention to export or we should not get involved in trying to be part of the domestic market.

on another quick point, fifteen years ago the chinese told me that china had realized it didn't have the wherewithal to throw money at the north korean problem. they couldn't resolve it that way. even after what we had gone through in recent years that is still the case. >> let me try the first one. i have some reluctance to are you in favor of government involvement because that is loosely translated into some form of industrial policy and i think the netted states is uniquely equipped to conduct the rational industrial policy. we have a system of government aimed at helping the losers, not promoting the winners. the moment government gets involved it is always trying to stop the normal market adjustments in some industry that has been adversely affected

light clothing or shoes or the more popular ones where we have a lot of trades. the truth is we have to stay through the natural economic policies from the government perspective. if you have a government that promoted savings, in this case reducing government savings and didn't interfere in the exchange-rate we could get a competitive environment where it would pay for exporters to focus more on foreign markets. north korea, what i know about this you can stick in your ear and i have a brother involved in this. >> there are some proposals for things like shifting -- the corporate tax is much higher than in europe and to be -- some of the distortions in the tax code in way is that could make

exporting more attractive and enhance growth more generally. obviously as infrastructure improves it helps, but it is not a matter of getting the government in the act. it is getting a level playing field. >> this wraps up not only this panel but this conference. before i let you go i do want to thank richard busch for joining to put this on especially to thank the staffs of the two centers who did a tremendous job in making all of this feasible. 9 also want to thank the speakers for all of the panel's many of whom flew ini also want speakers for all of the panel's many of whom flew in for this event today. it was a very busy day.

so thank you. [applause] [inaudible conversations] [inaudible conversations] >> during the last year as i served as solicitor general my

long standing appreciation for the supreme court's role in our constitutional democracy has become ever deeper and richer. >> the next step for eena kagan is to appear before the judiciary committee. find out about her on line at the c-span video library. watch what you want, when you want. c-span2, one of c-span's public of its offerings. live coverage of the u.s. senate and weekends, booktv. the latest nonfiction authors and books. connect with us on twitter, facebook and youtube and e-mail alerts on c-span.org. >> now a senate hearing on immigration. head of the citizenship and immigration services agency testified before the senate judiciary committee about the rules for foreigners visiting the u.s. and those seeking to

become citizens. senator patrick leahy of vermont shares this hour-long hearing. >> the director with us today, your first appearance before the judiciary committee since your confirmation. i appreciate you being here. at the time of your confirmation you would appear and i appreciate that. the u.s. citizenship and immigration service is a principal administrator of our immigration policy. it is charged with determining who is eligible for a wide range of categories and in shores those that are deemed eligible to not file a fraudulent claim,

don't wish to do us harm. the agency allows family members and foreign students, artists, athletes to enrich our economy and our culture. most significantly, it makes it possible for immigrants like my grandparents to realize their dreams of you as a citizenship. agencies, the pace of our national immigration system of rules and standards, is crucial to keeping our system strong and viable. a tremendous responsibility to adjudicate these positions. make sure it has high quality service. if i may be a bit parochial, vermont is host to one of four

national visa processing centers in the united states. employees at the vermont service center carry out their duties with conviction and tremendous care and i want to recognize their excellent record. i have gone to visit them many times and invite you to visit and i have long supported the immigrant investor visa, particularly the regional center programs something that senator sessions and i have discussed before. the program brings significant amounts of capital to regions of our country that face the economic challenges and it creates jobs for americans. entrepreneur is in vermont have used this program to revitalize businesses. they have economic benefits and job creation across our nation. i will soon introduce legislation to modernize the program. i want to make the program

permanent. my bill will ensure that as this program grows it remains free from fraud or abuse. the united states humanitarian policies, i commend your swift action to implement the announcement that the u.s. will grant temporary protective status for haitians after the earthquake and i hope you generously provide waivers for eligible temporary advocates. the same spirit of humanitarian aid i worked to allow lawful permanent residents to return to assist with reconstruction following a national disaster, armed conflict without penalizing future application for citizenship. it does not seem right to say they can't leave here to help

out in a devastated country and have that somehow work against them. i think this legislation would have a terrific help to haiti's recovery. you fulfill our country's commitment to refugees. i recently introduced two bills, the refugee opportunity act and protection act to strengthen the united states protection for refugees. i will look forward to working with you on that. senator sessions as often happens is supposed to be in five places at once. >> thank you. i have a hearing on the oil spill stretching across the gulf coast and energy committee. thank you for being with us. you bring in good spirit and

hard work to this job and you oversee all the lawful immigration to america and last year we lawfully admitted 1.1 million people into the united states and approved each of those. we are one of the most generous nations in the world with regard to immigration and we want to continue to be welcoming to those who avail themselves of our laws by coming lawfully and his will and ability to contribute positively to our country. ..

>> as you know, mr. shahzad who was arrested last week in connection with the failed bombing attempt at times square, though we're still gathering information on him, we know that he was sworn in as a united states citizen just april 9 last year, even though he had previously appeared on the traveler compliance system and had come under scrutiny of a local joint terrorism task force in 2004. he was able to obtain citizenship, however, because he married a u.s. citizen who petition on his behalf. in a report released in

may 2002, director of research center for immigration studies found that between 1993 and 2001, 48 terrorists had been charged, convicted, pled guilty or admitted to involvement in terrorism with the united states, within the united states. according to his study, at the time they committed their crime, 16 were in the united states on temporary visas, 17 were lawful permanent resident, 12 were illegal aliens ,-com,-com ma and three had application for asylum pending. though they're still much information to be gathered on this matter, it appears that he too may have gained a system and/or to become a naturalized citizen. as michael cutler former special agent with ins with 30 years said, oh, immigration benefit fraud. is serving one of the major that was not connected prior to the attacks of september 11 and

remains a dot that is really not being addressed the way it needs to in order to secure our nation against criminals and terrorists. so we like to inquire about that. you know, will not be able to stay to the whole hearing but will be submitting some written questions on those issues. i'm also interested in hearing how it is that it seems that your agency has exceeded e-verify and integrity to the civil rights division. i'm not sure that that makes sense to me as a way to manage the system that i believe you should be in charge of the and if violations occur, then they should be investigated. but i don't understand the process. so e-verify works. it is bringing some integrity to the workplace. it's not perfect but it does

help, and it's something we should be supporting and not restricting. thank you, mr. chairman. >> thank you very much. alejandro mayorkas is the director of the united states citizenship and immigration services. prior to becoming the director of the uscis he was a partner in the law firm of o'melveny & myers. previously served as a u.s. attorney for the central district of california. in fact, confirmed by this committee for that, and prior to that was assistant u.s. attorney in the same office. his years of service, both in the private sector and in the government, we welcome him here today. please go ahead, sir. >> thank you very much, chairman leahy, ranking member sessions, members of the committee. i am privileged to be before you today to testify about the state

of u.s. citizenship and immigration services. it has been nearly 11 months since i appeared before this committee for my confirmation hearing. at that time i spoke of my deep understanding of the gravity as the gravity as well as the nobility of the uscis mission to administer our immigration laws sufficiently and with fairness, honesty and integrity. in the midst of the challenges we face today, my understanding has only deepened. we are a nation defined by and won his success depends upon being both a nation of laws and a nation of immigrants. tremendous pride as a naturalized citizen, a former united states attorney and a codirector of the uscis, i work alongside 18,000 men and women who give so much of themselves as together we seek to reaffirm our nation's history and embrace its future as a world of golden opportunity for generations to come. almost 11 months ago i promised

you i would conduct an overall review of the agency. i have done so, and as a result i realized the agency's organizational structure, to reflect our priorities and more efficiently and effectively achieve our mission. i created a new protection and national security directorate, focused on preventing, detecting, combating and deterring threats to our public safety and fraud in our system. together with our federal partners and others would have a multilayered system in place to ensure those applying for benefits do not pose a security threat, or defraud the system. we collect fingerprints, conduct and name checks, screen individuals for criminal activity, and scour applications for inconsistencies, security concerns, and good moral character. continuing to uphold and strengthen the safeguards with the utmost vigilance, it's critical to ensuring the integrity of our immigration

system. our newly established office of public engagement is working to ensure we develop and solidify partnership with the public we serve as we review our policies and consider needed process improvement. we are institutionalizing how we keep our partners fully informed of the issues we confront, and were dedicated to meeting our challenges together with them. our new customer service director for developing new ways to communicate with and serve the public. we are building on best practices in the public arena and the private sector so that we can become a model of service and efficiency. this week we're issuing a redesign of permanent resident garden, commonly known as a green card. which include some of the most sophisticated security technology available to us today. the previous green card was designed and placed into service in 1998, and only minor changes have been made to it since then. our new card include additional security features, including

embedded data and polygraphs that make it more difficult to counterfeit and easier for us to identify fraud. we had uscis are working hard to build a strong and brighter future for our agency and for the public we serve. the public's demands and expectations of us very much for the question and issues you raise help define our goals and aspirations. i look forward to working with you and to answering your questions as best i can. thank you for the opportunity. >> thank you very much, and, director, i draft legislation to modernize a program. i'm a strong believer in ep five and i see how well it has worked. in my state. now, one of the issues i hear from stakeholders involved economic aspects of the program.

some state courts have expressed frustration, with investors petitioned being educated by uscis, adjudicators look at both petitioned and the business and attached to it. that can cause a lot of delays. i think we could promote efficiency and predictability if regional centers are able to seek agency preapproval for a business plan and which investors could then become involved, allowing the agency to divide between experts, would review the business plan, and immigration experts who add you to keep the investor petitioned. do you agree, have you separate the business plan approval process from the petitioned adjudication process you could

have more consistent and careful review of business plans? >> senator, thank you for your question with respect to the ep five program. that program, i myself have given it a great deal of attention to. i recognize the economic benefits. we would welcome the opportunity to consider the possibility of pre-approving a business plan and applications to establish regional centers. we understand the benefit that a regional center determination can have on future applications. i do want to say that we have taken a number of discrete steps to improve our eb five adjudication process. most notably with concentrated expertise in one locale were all eb five applications are submitted or for our review and consideration. were also in response of public

concern about the time it takes to review and educate those applications, we have cut the application processing time by approximately 50%. it used to be, used to take us approximately eight months to adjudicate and eb5 application, and our cycle time is now approximately four months. >> my concern is, obviously got a look at the immigration question. although what i have seen on these, very legitimate business people who try to raise capital through the regional center program. i just don't want the whole thing being looked at as one huge issue instead of breaking down just component parts and probably look at it in a more efficient way.

when we set the regional center program congress intended it to have flexibility to accommodate the realities of business, including unforeseen delays that occur through no fault of the investors, especially these days, the stock market goes up and down, capital flows more than we would like. but if you have an investor in a domestic business person acting in good faith, i hate to see the investors suffer the denial of a green card. so can we just -- would you commit to have your department and your office, work together, to see if we can find ways to make the whole process more efficient? >> most certainly will, mr.

chairman,. >> thank you. now, on another which is this is somewhat parochial, the dairy industry is not eligible to participate in an age to age agriculture visa program. i'm going to introduce legislation to ensure that dairy can participate in the program. i strongly support the legislation which would reform the over all h2a program. i realize they don't play a direct role in the development of h2a workers, but do you have any objection to a change in the statute to clarify that dairy is available for the h2a program? >> thank you we have been aware of the fact that dairy workers have not been eligible for the h2a program merely by virtue of the fact that their work is not

defined as seasonal under the current legislation. and we are aware of the articulated need to redress that situation. >> thank you. as i mentioned, you know, the vermont service center in my opening remarks, i do hear very positive things from people up there. there were, as i said, i have monitored it on different occasions. i think it's a great example, successful partnership by the federal government. i'd like to see vermont and uscis continue to develop a positive relationship. because we work together with vermont officials and your department to encourage that partnership. >> i would welcome the opportunity, mr. chairman, and i should note that i had the pleasure and privilege of visiting all of the employees at the vermont service center but a few weeks ago and the accolades it so richly deserves. >> thank you. and they appreciate that, let me

to you. >> thank you your. >> the very important these is that the vermont service handles, as you know, how big an abusive situation to seek protection of the federal government for independence from an abusive spouse or parent. i understand uscis is in the process of improving the training program for these by the adjudicators, i'm sure that there had a total confidence young. how is that going on? >> mr. chairman, does going on by well. once again the expert at the vermont service center doing an outstanding job of educating the jesus that address the dire situation which you refer. we're very proud of their leadership, not only in executing our adjudication

guidelines, but in developing them and training others to share their expertise. >> thank you. and, finally, the man in charge of being the time square bomber, faisal shahzad, didn't get a work visa and then he applied for a green card and it was naturalized. one of the background security checks would've been run at each point, was their information that should have been caught that uscis was reviewing his application? i realize it's one way to look at it in hindsight, but what is your you've shall? >> mr. chairman, i am constrained regrettably by privacy rules on commenting on the shahzad file, specifically. but i can speak of the process that we as an agency follow with

respect to the security and background checks that we perform. our and i thought and our national security preventive extremely robust. and their importance is have only been elevated since i assume the leadership of the agency. we conduct fbi, fingerprint checks. we conduct checks of databases including the data to the tax database. we them for the fbi to name the background, the name checks. we scrub the application itself an interview the applicant and work collaboratively with our law enforcement partners and our intelligence committee partners in ensuring that each application is carefully scrubbed and scrutinized to ensure that a fraud and a system for an error to our national

security is not affected. >> thank you very much. senator hatch? >> thank you, mr. chairman. welcome, we appreciate you. i think you're an excellent public servant, and we are very close and i deal with the recommendations. eight years ago my office worked closely with federal immigration agents to break up one of the largest marriage visa fraud rings in the country. as a result of the 18 month investigation called operation morning glory, 24 individuals were indicted on 79 counts including conspiracy, alien smuggling, marriage fraud and aggravated identity theft. let me say this pic i do not believe that all foreigners who marry americans are simply looking for a one way ticket. to the states but i continue to have concerns about the prevalent abuses in our country's marriage-based green card program. they can easily be called the

soft underbelly of our countries visa program. i often hear from my constituents of situations where do they or someone they love has been diseased by a foreign national who has committed to the mary jo until they're able to remove their conditional resident status. once their temporary status is legally changed, however, some disappear off and leaving the spouses with serious financial and familial obligations. is it true that uscis relied almost exclusively on documents, records and photographs with little opportunity for interviews or investigation of the petitioner? >> senator, our process of detecting and deterring marriage fraud is far more robust than that. as part of the television of the fraud detection and national security, director at earlier this year, one of the things that we're doing is bringing increased attention to your benefit fraud compliance

assessment pro graham. and one of the areas that we will be focused upon in that renewed assessment and review process is on the marriage of fraud issue. and i would be pleased to report the results to you once our study is undertaken. >> glad to hear that. is a true that once a fiancé or petition is proved that requires a quiet high evidentiary standard to refer a petition back to the uscis for revocation? >> senator, i'm not equipped today to answer that process question that if i may take the opportunity to respond subsequent. >> there are cases where these the petitions have been approved for couples who have never physically met or have only met once or twice? >> again, senator, i would like to come if i may, take the

opportunity subsequent to this hearing to provide you with a detailed report of how we address marriage fraud. >> i would appreciate that. last year in response to my question about marriage fraud, dhs secretary janet napolitano said quote there is a perception that marriage fraud is a rampant problem in the immigration system, but most marriages because, for uscis are codified. does uscis maintain any statistical information on foreign nationals who leave their spouses once they obtain permanent residence? >> that is one of the very questions, senator, that we will be asking and our benefit fraud compliance assessment of the marriage fraud. >> we would like to see that, that. but, you know, i always want to be fair to people and i appreciate what you're doing. on the arts act both senator kerry and i are sponsors of,

nonprofit arts organizations throughout the country, including many in utah, engage foreign guest artists and orchestras, theaters and dance opera companies. unfortunately, years of delays, errors and unpredictability forced some us-based nonprofit arts organizations from even trying to bring international artists into the united states. it's my understanding there's been a rash of unreasonable request for evidence or are at ease from the california service center that add to the delay in processing visas including omp visas. i am concerned that these do not matter to the statutory standards for determining the qualifications of oh and the outlook and. i understand a broad review of procedures is underway but in the meantime our nations all too answers are being injured. would you care to comment on

that and tell us what you might do in that situation? >> if i may -- >> and what we're trying to do, senator kerry and i. >> i appreciate your efforts and those of senator kerry. senator, the concerns that you expressed with the omp visa process our concerns that we avert our ticket by the public that we serve. a number of weeks ago i myself appeared in the california service center to host and engagement session with the community nationwide to hear their concerns with respect to the request for evidence that we propound with respect to o and p visa applications, and we are opposed to implement procedural improvement to address those concerns. in addition, just yesterday we published in draft form a new oh visa guidance to our field adjectives and we did so in

draft form so that the arts community and other interested communities could have the opportunity to comment to us whether the guidance that we intend to promulgate indeed addresses their concerns answers that kennedy well. and so the concerns that you expressed our concerns that are driving our agenda in the o and p arena. >> thank you and appreciate your comments on that. i have to comment that we have worked very closely with your service and we really appreciate all the help that we have received over the years. we want it to work well. what you to be pleased with what we do, but we get an awful lot of constituent work and case work in these areas. and it means a great deal to me, the kindness with which we are treated, the help and cooperation that we have. i appreciate it. just let me ask one last question. last year i included an

amendment in the only security appropriations act that extends for three years a special immigrant non-minister of religious worker-based program, pursuant to the enacted legislation dhs has required additional report on the program. can you give us some idea when we might expect to see that report? i hope we can continue that, because these are good people who do a good job and their religious worker's comp and i'd like to see us approach this in a very, very good way. >> if i may have your indulgence, senator, to respond to that, a tiny question of the report, subsequent am not aware but timing. >> you sure have my and told is that i want to again thank you for the work you're doing, and the people around you. we are very appreciative, and i know you're sensitive to the feelings of people who have these problems, and that means a great deal to me. >> thank you, senator. >> thank you.

>> thank you, mr. chairman, for this hearing. thank you, director mayorkas for coming here today. as the ranking member said, we are one of the most generous countries in the world in immigration. most people don't know this, but the u.s. consistently take more refugees than most industrialized countries combined. and i'm proud to say that my state of minnesota essentially welcomes more of those refugees than almost any other state. and i want to thank you especially for what you do for refugees and a siamese. i want to talk about the time it takes for family members of green card holders, citizens come in. right now green card holders wait for and a half years to bring their husbands, wives and minor kids to the u.s.

citizens wait about six years to bring their unmarried adult children here. even longer for some countries, as you know, for the philippines, for example, that way can be up to 16 years. now i can imagine not seeing my family for a month, although so far troops overseas don't see the families for as long as a year. but i can't imagine waiting 16 years to see your family. do you think these long waits are creating a disincentive, to enter the country illegally, or the senate to enter the country legally, rather, that incentive to enter it in a legally? >> senator, i appreciate the question. we avert a great deal about the

waiting times for family members of legal permanent residents, and that is of course a function of these availability. i must say that i have not given thought with the long waiting times have a causal connection to illegal immigration in this country, it and i would be hesitant to suppose an answer to such a serious question. >> what can we in the senate due to -- i know you're operating on the loss that we pass. what can we in the senate do to help reduce these backlogs? >> senator, the issue of visa availability and visa use is something that is within the purview of legislative reform.