report by michael chase, whom you will hear from later from the national war college has really documented this naval building program in a three-part series. now we understand that china, like any great power, wants to ensure the supply lines for the natural resource is that power is remarkable economic growth, but there is also the feeling in this country at this buildup of naval forces is also intended to define access to borders in this part of the world. ..

>> obviously, we're looking at huge trade of investment balances that is export oriented rather than increasing consumption. the currency peg, the wan is an issue of tension with the united states, the exappropriation of technology of u.s. firms doing business in china and of intellectual property are all issues. while china expects to play a global role with its enormous

power and status as the world's second largest economy, its seat on the world steering committee comes to us with understanding and requirements to respect the interest of other countries and accept the responsibility of the international community. now, a little economy at the counsel of foreign relations argued again, that china may not be interested in being a simple stake holder in the global system, but china has become a revolutionary power. this is -- this falls in the category important if true

>> i think at the outset at least from here, what can and should the senate do to vance and protect the american interests? i will sprat this in 2002 categories. regard to national security issues even for one that's been here a month, we only look to the lame duck session and the striking ongoing delay in the s.t.a.r.t. treaty to see what we face in the senate. it enjoys bipartisan support of nearly every national security leader past and public and republican on new s.t.a.r.t. continues after the senate held 18 hearings on the issue and granted multiple policy concessions. the r nearly the entirely caucus

recklessly delayed this. they should believe as i do national security imperatives should override partisan considerations. the senate's paralysis continues me to wonder how constrained we will be driven by politics. in the case of china, then, my opening question is will the senate be constructive, deinstructive on ire reel vaunt in the ongoing relationship? we hear american being weakened by china's economic rise. i'm comforted by the long view interpretation of the threats imposed by nations. i'm talking about the predictions made in the 1950s by russia following the lunch of spuk nick and then being overran in the 80s. there are key differences today with regard to china, but i

believe the future of our relationship with both russia and japan doesn't not exist as one extreme or the other. it is at least for now hyperbole to think of china overtaking america. the world's sole superpower changed, but at the same time, i don't view it as a 0-sum game. china's rise doesn't necessarily mean the decline of america, and a strong china can and should provide security opportunities through which it's possible to pursue shared interests in a mew chiewl benefit. sure, there are troubling trends. china increased spending. china's gdp will pass ours in 2030. students in shanghai topped not just those in new york, but those in the most successful educational systems.

the $900 billion of u.s. treasuries presents a growing challenge to our independence. what matters is whether we measure china not in terms that are relative, but sloit. in reality our budget is 4.5 times china and invest 6 times in r and d. our higher education system in my view remains the envoy of the world, and we still manufacture more than china despite the trade imbalance and perception of the average american. the trade debt is a critical challenge for us. we have neither quick nor painless solution to either. thank the story in -- that's the story in numbers, but i wanted to give you the perception from the campaign trail. as i was going to the peach parade in central delaware, my wonderful 9-year-old daughter

was joining me as she often did. there was an article in the news journal saying the chinese economy was now the second largest in the world. musing on this, i stopped at a light, said to my daughter in the car, what's the most powerful country in the world? without looking up she said, oh, da di, that's china. why? because everything i play with in my room is made there. i repeated that story up and down the state and was struck at the strength at the response from average delawareans from seniors, high schoolers, veterans, teachers, democrats, and republicans, and i think it shares the concern we are losing out to china, losing manufacturing jobs and as a consequence global leadership tomorrow and will impact not just our security, but our prosperity. while the challenges are real,

measuring by the china's rate is di seifing and -- deceiving and these tasks are ours to do like increasing jobs and making products more competitive. we have to think how our own behavior is contributing. in fact, in my view, the most important path to take would be in the face of china through dplessic changes rather than things that are foreign in nature or to use a more simple metaphor, i think the best way to drive forward is looking through the windshield rather than the rearview mirror. we need to reduce our deficit and increase savings, reduce dependency on chinese lending and maintain our competitive edge. we need to address critical issues in trade, intellectual property rights prexes and tax

policy to strengthen and sustain our capacity to innovate and reinvigorate american manufacturing to restore leadership and address our trade imbalance. if we cannot do these things, close deficits, reduce debt, and stimulate growth, we will, indeed, forfeit critical opportunities for piling a mutual relationship with china and ultimately our leadership in the world. the senate can and should play a role in choosing which direction we take, and it's my hope we can overcome the current bitter partisan divide and forge a path. this will require sacrifice. this is hard to come by in the head winds that dominate the short term political forecast. if we choose not to, it will strain our diplomatic leverage on other issues, north creigh korea, iran, and human rights. this was the decision from receiving the nobel peace prize

demonstrated how far beijing is ready to go and the issue is not surprising given the nation's reflected posture to perceive challenges from its sovereignty of the regime. moreover, many other countries to boycott the the china's growing power regionally and globally stems from its economics with wide ranging implications and look at iran to see the overlap between security and economics. they have been both an obstacle and partner. on the one hand they supported sageses in june, on the other hand, they have taken precedence over nuclear security with beijing's calculations.

they are the biggest exporter of oil nec to japan. as the senate now considers implementation of unilateral sanctions, it's important to consider china's ability to fill the void left by energy companies leaving iran. it's important to consider the steps which iran considers policy between u.s. and china. as president obama hosts president hu next month, we are reminded of the issues with china. looking forward, the u.s. relationship with china is highly challenging and complex and frankly it raises more questions than answers at the moment, but it is our job to search for the answers and remember the concerns of the average americans who elect and send members of congress here to be a part of the process. it is also important for us to keep in mind, i think, the view of the average american who takes seriously the warning in our rearview mirror that objects may be closer than they appear.

that at least is what i plan to do. i take seriously the challenges facing our nation internally and on the stage and look forward to working with colleagues on both sides of the aisle to bear down focus and address these challenges. i'm grateful to ppi for this opportunity this morning and i hope i contributed something as a new member of the senate in wandering if we will play a strategic role. thank you. [applause] >> i think the senator has time for one or two questions from the press, so this is your opportunity. please fire away and identify yourself first. yes, sir. >> thank you. [inaudible] on commerce and trade. before the meeting there are 32

americans who road to the chinese to talk about currency and open trade. [inaudible] >> well, i obviously don't speak for the senate, but i would say my hope is we continue to weave a positive path forward allowing us to recognize the success of both nations is interwoven and we need to deal with currency issues, intellectual property issues, and trade issues in a common context, and if we do that and we reflect that, we can then succeed in a way that is harmonious then for both nations. thank you. please? >> i'm shelly from doa. my question is in the next two weeks, do you think the senate has time to take up the currency reform issue? i know two senators who proposed the bill yesterday. >> the time remaining for our

lame duck session is very short, and there many, many issues clambering for floor time or legislative attention. my strong hunch that is not an issue we'll see floor time between now and the lame duck session. it is important and an issue to be considered again in the next congress. my hunch it's not on the list of things to be acted on in the next 10 days. i'm happy to take one more. please. >> sorry, i can't stand up because of the table. senator, you said the best way to address foreign policy and defense concerns regarding china is to deal with domestic issues, but are there some things that the united states can and should do specifically in the defense realm as china becomes more assertive particularly in areas of the western pacific with the economic zone, with all the

various things they're doing saying that the u.s. aircraft carrier shouldn't go into the yellow sea and the statement in singapore saying we have to accept the arm sales, but we don't have to accept them anymore, and we're not going to. how should the u.s. respond to that? >> i do of course we need to continue to sustain our critical sustainable -- excuse me, we need to continue to work to sustain our critical strategic relationships in the region so things that would, for example, impair either treaty obligations or ongoing relationships with japan, south korea, taiwan, we shouldn't embrace. the larger point was this. if we don't get our economic house in order and address our balance and payments, if we don't address our manufacturing, all the rest of it in the long run is commentary, and so short term strategic concerns and interests of the united states,

absolutely, we need to continue to advance responsibly in a multilateral framework, but if we don't keep an eye on the long term interest of the united states and china and focus on that, then the short term strategic interests will be overwhelmed by events. the way you drive a car is not looking over the hood, but looking down the road. in my view, we can have long term harmonious interests. these challenges are significant and real and deserve our attention. we need to make sure we are tending appropriately, but not in a way that prevents us from forging a constructive long term relationship. thank you. >> thanks a lot. [applause] thank you very much senator coon. thank you for emphasizing america's responsibility to rebuild its foundations of economic strength. very important points. thank you very much, senator coons. it's my pleasure to introduce a

special guest representing the united states government. we're honored to have chip agreeson here today. here's the secretary of defense for asian and pacific security affairs and retired general in the united states marine corp.. he was formally the commanding general of the marine corp. forces in the pacific and central command. he served and lived in japan. he's also a combat veteran of vietnam earning the brown star and purple heart. he's a graduate of the u.s. naval academy and i note in concluding that service to the country is evidently a family affair for the gregsons as his son is a marine corp. officer. secretary, we're proud to have you here, and please -- ? >> thank you. >> thanks. >> pardon me while i rearrange a

prop here to get my notes at the right height between the bifocals. any of you that laugh at that will be there someday. [laughter] thanks to the progressive policy institute for organizing this forum and thanks to the university of california and washington center for providing this warm venue. i join you this morning on behaver of under secretary of defense. michelle was looking forward to being here, but was called to the white house this morning for various meetings on short notice. there's a lot of these meetings going on lately. she sends both regrets and best wishes for a successful forum. i'd also like to join with senator coons in noting the passing of a great hero of american government and diplomacy, richard holbrooke in the past day or so. we have indeed lost a giant

figure on the american scene. for over two decades, will and colleagues at ppi have been among the leading voices for a strong, senator, principled approach to national security. this blend of strength has a proud lineage established in world war ii and in the post war decades with leaderses like franklin roosevelt, harry truman, and john f. kennedy. it's a challenge that america faces in the 21st century. among the greatest challenges and opportunities we face is the on thed development of the asia-pacific region and in particular, the rise of china. i think it's useful when talking topics this varied and complex to remind ourselves of basic facts and perspectives. one of the most important is that the asia pacific region

experienced nearly 60 years of general peace, stability, and prosperity. yes, there have been significant exceptions like the war in vietnam and clashes among asian powers like between china and vietnam, china and india, and india and pakistan. even with that in mind, it's impossible to look at the last six decades without marveling at the overall stability and prosperity of this period. this record is more remarkable when one considers the poverty and strife that prevailed over this part of the world for so long. another basic fact to keep in mind is that this long term security, stability, and prosperity are the direct result of u.s. leadership and engagement. as this audience is keenly aware, we are a pacific nation. our presence in the region is vital to the progress and growth we have seen that.

that progress and that growth proceeded to the point that the region is now a true global economic catalyst. consider just a few statistics. china has sustained economic growth rates that top 8.5% per year even at a time in great financial uncertainty elsewhere in the world. 15 of the 20 largest ports in the world are in the asia-pacific region with nine located in china alone. china is now the largest trading partner of japan, india, taiwan, australia, and south korea, all partners or allies of the united states. the extraordinary growth of the region and of china in particular constitutes one of the most important geostrategic of all time. on the one hand it relied upon the openness of the global

economies and on the acceptness that make it possible for pacific nations to trade peacefully and profitably with one another, and with the economy's of the middle east, europe, and the americas. on the other hand, the immense growth of the region created shifting power dynamics. even as the region's vitality creates opportunities to cooperate, it creates a more complex security environment that if not properly managed, could potentially generate conflict. for a stark illustration for the potential of trowel in the region, consider another fact. four of the five armies are in the asia region.

we and increase capabilities are not necessarily cause for alarm. military modernization is a natural aspect of any country's development. however the u.s. shares the concern of many in the region that this type of military

buildup or exceeds china's defensive needs. in addition these kinds of weapons threaten to undermine the basic norms that have bolstered east asian peace and prosperity such as open access to sea lanes for commerce and security assistance. we call upon china to become more transparent regarding its military capabilities comic stem insures and intentions. we are not asking for an unreasonable degree of disclosure, simply enough to allow all parties. both the u.s. and china expressed their views of the dangers that exist whenever the military-to-military relationship is suspended or fails to be and lamented to its

full potential. accordingly, both sides stressed the importance of moving the relationship he eon the on-again off-again cycle. we need to sustain a comprehensive dialogue, including through periods of disagreement. after all we must develop procedures for reducing the risk of misunderstanding between american and chinese forces as they come into more frequent contact in the western pacific and in other regions of the world. we seek a milton mil relationship based on mutual respect and mutual interest, a relationship that acknowledges different provides a continuous process for seeking common ground. we must actively seek points of convergence while candidly discussing those areas where our interests diverge. the united states and china are not inevitably destined for conflict. even as we manage our differences we can deepen our cooperation across the full range of our shared interest.

we are at a crucial moment in this process following completion of the defense consultative talks we move towards two major events next month. secretary gates' trip to beijing and president hu meeting with president obama in the united states. these high-level visits will give our two nations an opportunity to set a tone of rot or, more sustained engagement. the stakes here are very high. after all interdependence among states has grown. global challenges have grown. the need for greater cooperation and greater shared responsibility has grown and no bilateral relationship in the world can shape outcomes in the 21st century more profoundly than that between the united states and the people's republic of china. between us, we have been extraordinary opportunity. we can help foster an era of continued relative harmony and

prosperity in the age of pacific region and worked to extend that harmony and prosperity to other parts of the world as well. we can extend and deepen the international laws and norms that have foster the progress of china and other asian societies over the last half-century. together the united states and china can help build a new century of global stability, broad and prosperity and sustainable growth. but this will require greater measure of earns trust and mutual openness and the time to begin is now. thank you very much. [applause] and i would be happy to take any questions. >> general, during the talks last week, was there any new understanding reached on taiwan?

is the u.s. china military dialogue on firmer grounds now? [inaudible] >> there are about three questions. during that defense consultative talks, there was a sharing of viewpoints on the arms sales to taiwan. the second question was whether the u.s. china relationship is on a more stable ground? yes. the more interaction we can have at all levels with the people's republic of china, the more there is a shared understanding, the more we can reinforce our joint activities or even our independent activities, and areas where we agree and thereby minimize the difficulties we

have in areas where we disagree and the third as to whether we are one taiwan arms sales away, that is up for others to decide. >> could you tell me -- [inaudible] [inaudible] >> to the first part of the question, we are aware that after a long period of discussion covering ears, that the japanese have, are about to

come out with new national defense program guidelines that move away from a posture that was really inherited from the cold war days to one that is different from that. to the question whether the united states is somehow leading japan into a posture that is altering their military with regard to china, no. we are not and you would have to refer questions on more detail on why the japanese see the need to do this to japanese spokesman. >> standing in the back, please. this is always good. i'm looking right into a

spotlight so i know there is somebody back there but i can't see them. >> general larry shaughnessy from cnn. my question is about secretary gates' visit to beijing next month. best case scenario is it returning relations between the military to china in the u.s. to where they were about a year ago or do you foresee that they can advance gates and his chinese counterparts can advance the relationship to a better place than it was about a year ago? >> the shortest answer to your question is we seek a return to a far better place than it was over a year ago. both president hu and obama have stated we seek a positive, comprehensive and constructive relationship between the united states and china and that also includes the military-to-military relationship. as i tried to say in my remarks there are areas where we disagree certainly. there are areas where we agree and there are areas where we can

operate together as we are doing now in the gulf of aden and we seek to reinforce those areas where we can work together and continue to work on those areas where we disagree while minimizing their ability to make their relationship more difficult. >> thank you. >> i am richard, professor of international economics at johns hopkins sites. the previous speaker, senator cozens asserted that we are compromised in our relations with china by our enormous embeddedness. i think this might be arguable. there is a saying that if you invest a million dollars in a company, you on the company but

if you invest a billion dollars in a company, the company owns you. so exactly in what way is our position with regard to expanding areas of cooperation that you say your objective was? how is that exactly compromised by our our indebtedness to china? thank you. >> questions like this are always a bit amusing when they are aimed at somebody who spent 37 years in uniform. by definition i don't know anything about high finance. but, let me offer a point that goes perhaps to senator cozens broader theme and that is a general lack of confidence in america that is being exhibited in various corridors. i heartily endorse his comments on the positive side. our university system and other things like that, the

manufacturing that we do that is in areas that are very much in our interest. i know that my colleagues work very diligently, but our we are only limited by our imagination and by what we want to do as far as accelerating the positive relationship. i would be happy to take the substance of your detailed question and pass it to my friend on the treasury who would be much better quick to answer it. >> we have time for one more set could we have a member of the press, please? >> thank you. during our defense affairs consultation this week, the united states proposed that the

the -- framework to avoid on and off military-to-military relationships in the future, but i am sure if the united states has arms sales to taiwan in the future, the relationship will be interrupted again. so, would you please elaborate, what kind of mechanism of framework it will be? thank you. >> well i hope you are wrong on the certainty of the relationship teeing interrupted. on the united states side we feel that the military-to-military relationship is of mutual advantage to each side and it is part of the corporative comprehensive and constructive relationship with both president hu and president obama have stated is the goal of our two countries. we seek further participation of chinese defense and security

personnel in a wide range of talks with the united states, not just the defense to defense relationship and we would see the relationship growing in that direction. thank you very much. [applause] [inaudible conversations] >> my job here is to direct a moderate these panels and i'm not going to deviate from the norm. we have three of the best thinkers on u.s.-china relations for my money and the country and we hope that each of them provide fascinating perspective as i'm sure they will.

what we are going to do is just just -- their biographies are in front of you in the packets you may have picked up on the the way in so i'm not going to waste their valuable time by logging all of them as they so richly deserved. but i'm going to turn it over to them for a series of remarks and hopefully we can move quickly into a discussion and because they are so distinguished, the distinguished panelists line goes. i have only provided them with very broad sort of instruction as to the direction of their remarks. joe and i have a book coming out on china so i anticipate he will preview that. tim lived in china for several years so i'm hoping he will provide a richer perspective on his experiences and hearing u.s. policymakers talk about these kinds of things and then sort of absurd and maybe a little bit of a contrary and point of view. how are we perceived in china? chinese government official on

the man on the street and then mike chase will give more of a military perspective. hopefully as you come and you have all managed to pick up a series of free policy memos that mic has written for the ppi talking about china's military priorities and budget and then when we are happy to have released a day on china's naval powers. and look at this. with that i will turn it over to joe. >> thank you very much jim. i have just come back from beijing, shanghai, taipei and tokyo so it is fresh in my mind that let me mention the book which is behind my thinking on this because i want to take -- we can answer media questions in a q&a but i want to take a longer. percocet fits in my opening remarks. the book is called the future power. i am interested in how

information technology is too great power shifts in the 21st century. one is a power transition from largely west to east which includes the rise of china. the other is power diffusion away from all states to nonstate actors and that affects both east and west. let me tie the two together at the end but start with what is called the rise of china, which should more properly should be called the rise of asia which is china's part. china is obviously growing dramatically and it is also having a more assertive foreign policy as it grows. in the recent year or so, this greater assertiveness, this foreign policy, has been noticeable both in the region and in washington and people speculated about the reasons why. one is that there is a belief in u.s. decline of the financial

crisis was a turning point and the other is that there is an increase in nationalism domestically in china and that his been exacerbated by the transition of power in 2012. nobody wants to be less rationalistic than their competitor at a time like this. now, that has led some observers for example my friend john meerschaum or, a distinguished political scientist, to say in a speech in australia last summer at the rise of china can't be peaceful. so there is an interesting and important question here, which is can it be? it matters tremendously because if you go back to power transitions in history, thucydides gives the reason why the greek city state board itself apart in the peloponnesian war as the rise of the power of athens and the spirit created in sparta.

many people say world war i in which the european system tore itself apart was the rise of the power of germany and the fear created in britain, and there is a view by some at the 21st century narrative will be the same. the rise of the power in china and the fear it creates in the u.s. will be too great conflicts. certainly there is a rise in chinese power, but it is a mistake to overestimate it. goldman sachs has given a precise year, 20207 when the chinese economy equals the american economy. first beware of anything that precise about the future but secondly it is plausible that the science of the chinese economy somewhere around 2030 would be sized to the american economy given growth rates. a quality of size is not a quality of composition. in per capita income which gives you a better measure of the nature of an economy, even when

it equals the u.s. let's say around 2030 will be one third in per capita income than that of the u.s.. the second is that in military power yes there are increases in chinese military power particularly in the area in the near seas, which i will way to let mike chase describes this and his pamphlet that in terms of global military power china is not about to catch up for a decade or two decades probably with the united states and global military power. as for soft power, a lot of people have talked about the great rise in chinese soft power reputation. they are spending billions of dollars on not only confucius institutes but having broadcast now having their own cable tv and so forth. i was asked at one meeting in china where i was giving a speech how can we increase our soft power and i said let shall

bow out of jail. that was met by resounding silence. it is worth noticing that china, what with one action, basically undercut these billions of dollars investments in their own soft power and they don't know how to get away from that given the political system the way it is now. that is the real problem for them. and, in then forth and finally in terms of chinese power and not overestimating it, we talk about the rise of asia. it is true, it is real. asia is one thing. let me tell you that asia includes japan, india, vietnam, the other aussie on countries and they have quite different views about the role of china. in fact most of them are very much in favor of an american president to balance an increase in chinese power. so that means a history that people use when they say the narrative of the 21st century is going to be like the 20th century, is wrong.

germany had passed britain and industrial production by 1900, 14 years before world war i. if what i said is correct, that make the argument in great detail in the book, china is not going to be equal to the united states and power for decades and perhaps even longer. if that is true, then we don't have to have the second half of the equation. in the fear it created. americans can be more relaxed about how we deal with the rise in china. is going to be a long-term relationship of competition and cooperation and we are going to have to learn to walk and chew gum at the same time. both halves of that are going to be important. or another way of putting it is if we fear too much it becomes a self-fulfilling prophecy. the second is that in this issue of power diffusion, dealing with nonstate actors and

transnational processes, we are going to need to cooperate with china whether it be climate or whether it be financial stability for terrorism or cybersecurity. we in china are going to need to cooperate. so, leading to much fear generate and destroy this balance between competition and cooperation of relationships is going to hurt us and it is going to hurt china so i have argued that to paraphrase franklin roosevelt in terms of thinking about long-term china policy the greatest fear we should fear is fear itself. >> thank you. >> i am james from "atlantic monthly." i've been a friend of joe's nye's for a long time long ago and my presentation which i will also keep to seven minutes will be complementary, reflecting mainly the difference in our professional background. i have been living in china for most of the three and a half in last four years.

i was there back in d.c. now. i published one book two years ago and there's another one i'm try to finish now on the general contours of how to think about china's rise. let me suggest three ways to think about it which match, sort of match would joe is saying with some differences in emphasis. the first involves america's sense of its own problems, its own internal tensions whether it is in decline or not which is always an issue in american politics and has been for centuries. the central thing here is that the issue that mattered most to america's viability, to its success economically politically and socially have almost nothing to do with china. they would be identical issues of china did not exist or if china words of some kind of rematch or -- pre-manufacturing area. as you look at america's vitality in the historic sweep the issues of greatest concern are for example the functionality of the political system whether the u.s. is able to address the big troubles

through its political vehicles, whether the senate has the appropriate structure for this air etc.. that is one rate question of political functionality. the others other is the polarization of american society on many axes of wealth distribution, political views or whatever. each of these has some relationship to china's rise, especially the structure of the economy but you could say if china had not gone through its last 30 years of revolution these would still a great issues of the united states. so it is striking to me that compared today with the japan concentration of 25 years pass, and i was living in japan at that time, think there was more reason to think that japan's structure was involved in america's economic problems of those times than it is to think china's rise is really connected to what is happening in the u.s. now. so point number one is american should think of their own successes and weaknesses as being intellectually separate

from whatever china's achieving or not and that is one of the fear factors that joe is talking about. i will let sound engineers do whatever they want and i will just keep on talking. a second that i think is very important and connects to what joe was saying related to john mayer sheinberg quote is i think the relationship between the u.s. and china in all dimensions should be thought of as merely able and determined by human beings rather than something that is subject to the iron grip of history's laws. here is what i mean. looking backwards you can say it was almost inevitable that germany's rise 100 plus years ago would be disruptive to the european order, to the british interest order of the imperial time but there was something in the nature of germany's expansion, the structure of its economic growth, the historical burden that was in germany at the time which made it very unlikely that would be

disruptive. i would argue something similar was the case with japan's rise. there was something almost inevitably disruptive to the order from japan's very sudden rise. nothing is truly inevitable but it strikes me how given the nature and the scale of the historic shift underway with china's emergence from centuries of relative decline in the world, it is remarkable how few built-in points of conflict there are with the existing power in the united states or even with the other regional powers in the rest of asia. we certainly can imagine areas of terrible conflict between china and japan, china and the united states, we can imagine these things. we also can imagine scenarios in

which that does not occur in which for reasons of economic complementarity, historical ties images of one country it is not necessary between these two powers and just to mention one or two elements here and the element where i agree joe and i over the years is that the dimension of american soft power to use a term that joe has client, these are things where the u.s. is likely to be able, could arguably keep its own university system, its magnet for gration and all the rest the matter what happens. the second i would make it it is it is remarkable how little open source of conflict areas and with skilled judgment by leaders on both countries it should be possible to keep this going for another 30 years as holbrooke and others did in the past. this brings me to the third main point to raise, which is the

question i have in mind, specially the last year and a half of mounting episodic u.s. chinese tensions. the question is, has the fundamental agreement of the past 30 plus years been broken or not? what i mean here in a nutshell is from the initial openings under richard nixon and chairman mao to sort of the codification of the agreement under deng xiaoping and jimmy carter there has been a sense that american chinese relationships arrested on a three-legged stool. lake number one with the idea was better for both countries to work together than to view each other as certain enemies, that there was ground for partnership between the two. the second leg of the still was the idea that china's prosperity need not e. a direct expense of the rest of the world including the united states and lake number three was nonetheless there would be serious disagreements between the country still over matters of international policy, over domestic politics in both u.s. and china etc. etc.. over the past 30 years you could

say the ups and downs of the relationship have been within that. there've been times a real disagreement. there have been times of relative lack of disagreement but it has been within that arc. the question is whether the last year has taken us outside that band of 30 years understanding, whether a real change in economic relationships perceived change in economic relationships, current as of nationalism in both countries, shifts in the military balance etc. whether they actually have change the fundamental agreement. my hypothesis is no. my hypothesis is we are still within the bounds of the relationship of the past 30 years. i won't give you to 16 different reasons i think that. i will just say it is my hypothesis to -- so to sum this up the first main point americans think of this problem of being a only and not really related to china and second this is a relationship within human ability to shape and it has been

shaped more or less for 30 years that the challenge and third my hypothesis is we are still within a historic range but that is what is against the evidence month by month. >> thanks for inviting me. mike from the naval war college. for same applies to say that the views i'm about to express her my own and don't necessarily reflect those of the naval war college, the navy or defense. i have a narrower focus than the other two panelists and that i'm going to talk about chinese military modernization and what that means for the united states we have certainly seen much greater defense spending especially over the past 15 years since secretary gregson mentioned. at double-digit real increases in defense spending in most years since the mid-1990s. we have seen the introduction of a lot of new hardware, both hardware china has imported from abroad and increasingly they are developing domestically. we have seen organizational reforms, some changes in the way the chinese military organizers

and trains and equips itself and i think most observers agree that this is leading to a more professional and a more operationally capable chinese military but that is leading a rather large question that question is one in which there is a lot of room for debate. help big of a threat is it to the united states? that in turns leads to questions of what should we do about it. and then the challenge here is that when you are trying to assess how capable the chinese military is you are looking at a military that hasn't been involved in major combat operations for more than 30 years. the last time the chinese military went to war it was against vietnam in 1979, and as an outside analyst trying to assess how capable a foreign military is when you are dealing with one that hasn't been involved in combat operations for an extended period of time you are left to look at doctrinal statements, trends and acquisitions, how the defense budget is shaping up. you are left to look at

exercises in training, how will they have performed in other types of operations, non-war military operations as the chinese call them, and that leaves a lot of room for debate about how good they really are so you will find on one end of the spectrum some analysts who accept the chinese military as extremely threatening to allies and on the other end of the spectrum you will find people who say they are still really not that good. they still have a lot of problems. one of the questions we really need to think about is how do we try to evaluate how good they are given they haven't been involved in combat operations for so long. you can look at the defense budget of that certainly tells you something about the leaderships priorities. tells you something or could increasingly in the future tell you something about the trade-off that they would have to make if economic growth slowed or if their domestic problems became even more pressing than they are today. but just looking at how much money we are spending doesn't really tell you very much necessarily about how good your military is becoming.

you could try to compare the chinese military today with the chinese military five, 10, 15 or 20 years ago and that is worthwhile in many respects. they can also be misleading because especially if you go back to 15 or 20 years ago or earlier in and that time period you are looking at a change from a very low baseline. some of the changes you have seen perhaps with more dramatic because they were beginning from such a low starting point. another metric that is often used is as to compare the chinese military with the u.s. military. they are still quite far behind the u.s. and a number of respects. that is often misleading because they don't necessarily need to be as good as the u.s. military in any particular area to be able to execute the missions their leadership has assigned to them. you can take the example of china's aircraft carrier program. it looks as if they are finally getting ready to have an aircraft carrier in the not-too-distant future. of course is going to take them a long time to learn how to operate safely and effectively. aircraft carrier -- as

proficiently as the united states does but does that really matter? if you are not looking at it battle midway sort of scenario perhaps that is an important. it may be important more to china's neighbors and more immediately and direct way than it is to the united states directly. so, these are all ways that you can try to measure the chinese military's progress but none of them are perfect. what you really need to do and this isn't perfect either but i think it is is the least improvement is to look at their capabilities and look at their operational concepts are going to context of the missions the chinese communist party has assigned or is likely to assign to them. then ask how long can they execute those missions with the concept they are developing in the abilities they are developing. if you look at something like for example their ability to blockade taiwan if they were ordered to do so, well, in terms of a traditional naval blockade you might say they still have a long way to go in certain

respects but on the other hand if they could use their missile force to enforce their blockade, then perhaps they are farther along so you have to look at how they would do things. not necessarily how we would do them if we were given the same mission. similarly when you look at the anti-access in areas of capabilities they are developing, it does pose a serious threat to our traditional tools of presence and power projection in east asia. they aircraft carrier and the networks that support them. we have come to rely on two underscore points with our diplomacy and foreign policy in east asia. the question then is how big of a threat is the source of something we should look at exclusively as a threat? i would say the answer is we need to look at this is something that presents challenges to the united states but also creates new opportunities and the challenge is how do we deal with those? one way we do with them is by strengthening our relationship with artistic security partners and our allies in east asia. another way is by developing

some of our own new operational concepts and perhaps a new capabilities to contend with, the one's ones china's developing a specially anti-access and denial capabilities that we need to be careful about how we go about doing this because if there was fear that was the problem during the peloponnesian wars as much as rising power could be the case here as well. does not despair on the u.s. side that fear on the chinese side as well. if we think about their threat perception and there is a perception that i think quite widely is held in national security policy advisory circles contain china. to be careful about doing things that feed that misperception. we don't want to do things that are only going to further convince china that we are determined to prevent their emergence as a great power because of our own fear of. so we need to be very careful about how we calibrate our responses and finally i would say there are for attendees here. assistant secretary gregson

talked about chinese -- of counter piracy actions in africa. increasingly i think we will be able to cooperate with china in areas like counter piracy and also in humanitarian assistance and disaster relief. as china's military becomes more capable it means they are also more capable of teaching those types of missions that are common goods for everyone and once that hopefully we will be able to work more closely with them to be prepared to execute those types of missions the next time we need to. we may see the u.s. military and chinese military military working side-by-side in a disaster relief operation in east asia for temple and i think that is what we should aspire to well at the same time trying to prepare ourselves for some of the challenges that their military modernization necessarily entails for us. >> thanks. as the moderator and going to take my privilege and sort of pose a good hopefully overarching question that addresses topics everybody has talked about. in no way does this nation -- notion appear.

joe and i talked about how we risk having it become a self-fulfilling prophecy. james talked about being intellectually separate within the united states and then having a sofa falling prophecy sort of risk -- unjustifiably driving things like defense budget and defense spending which feed narratives within china. that looks like the united states is trying to insert was so if we tie all this stuff together, president obama's going to meet with president hoh in six weeks or so. what is a good message from president obama directed at a domestic audience about what we should expect from china? domestic u.s. audience. we have talked about cooperatiof containment, properly assessing what thread if any there is, how we work to operate and things like that at how does president obama help to repair the domestic, the domestic clinical debate so that these tensions don't get exacerbated?

>> and i throw it open. >> i will have a flanking response to that question of how i think, because i don't know, president obama for all the other reasons in his political situation now is maybe not in the best position to give a reassuring message that i think needs to be given. i think anybody who has access to means of communication could i think give americans the contradictory stomping but those parts of a true in my view message that on the one hand take china seriously. on the other hand don't be panic or afraid of it and these recent polls showing that 44% or 55% of americans think china is the world's leading economy are crazy. to become the number two economy in the world means its per capita income is one tenth of japan's now. making clear americans recognized the importance of

engaging china in all ways on all fronts economically, strategically, environmental and all the rest without thinking this is some challenge before which america should quake. the thing i think obama should say is what he is done in its previous state of the union message say china is an example of what can be done. a. a sputnik type fear example but saying if they can have these clean energy plants we should be able to do that too. if they can build better rail lines we should be able to do that to max out a standard-setting illustration. >> i agree with what jim said they think we should avoid looking for clever phrases whether disengagement or strategic partnership. these things always given away because way because they are misinterpreted. they talk about we wanted normal cooperative relationship. we have lots of friction. it would be a normal relationship with france or britain, with japan. corp.. we cooperate with all countries

still in normal cooperative relationship with china and then stress some of the areas where the american public has something to gain from that cooperation. >> is difficult to do when political candidates run ads talking about off shoring jobs and painting the chinese dragon is the looming enemy and things like that. >> but that is the importance of what which ms said. with people in the american public realize how far ahead of china we are they don't have to be quite that afraid. >> and i think secretary gregson mentioned a plan to get 100,000 americans who oversee china. i am in favor of every american of every age spending a lot of time in china just to understand what is appealing about it, what is bad about it and its strengths and weaknesses. just to have this fully featured appreciation of why it matters and what to be afraid of and what not to. >> i agree. that suggest when he to have realistic expectations because i think sometimes we are disappointed because our

expectations were too high in the first place. they're going to be a lot of opportunities for cooperation. they are going to be ways in which we can work together with china but they're also going to be disagreements of the type we have seen over the last year and the type we have seen historically and again as long as those disagreements are not taking us outside the general thrust of where the relationship has gone over the past four decades now, those are things that we have to work to manage not necessarily derailing the relationship. >> i was wondering if i could ask a question about the military point of view. you mention it is difficult understands china's military because they haven't been to war in 30 years in the west by contrast is virtually always at war so they we could see our doctrine. isn't that also an argument for thinking that it is an argument for the military basically weaker, and the weaker range of the assessment because by being always in action u.s. militaries are refining what it does? >> right and that is something

the chinese military officers when they're writing about their military shortcomings of -- acknowledge himself. they say because they haven't have a bit about major combat operation for so long is difficult for them to have a full appreciation of all the things that can go on all the problems you can encounter when you are involved in those types of operations. now they also have had the opportunity to watch and learn from everything we have been doing during that period of time so i wouldn't oversell that is a constraint on their capability but it is something to keep an eye on. >> and with that i'm happy to throw it up into the floor for any questions. these raise your hand and identify yourself. >> thank you. i am ed corwin with third way and i have a question following up on the discussion we have had a fear this morning. there is also fear in china which drives their push toward

export driven growth. you read that the chinese are very concerned that if they don't grow at rates approaching 10% that they risk the mistake social unrest. that of course creates and helps to drive some of the economic robbins that we have in china. how can we help china overcome fear and convince them that they need to move to a more domestically driven, consumption oriented model that will benefit both them and the world trading system? many bright economists educated overseas, who are working on this next five-year plan, who realize that they have to move away from export led growth which led to the imbalances that contributed to the crisis in 2007 and eight. and their next plan is indeed to increase consumption.

the less dependent upon the export oriented industries along the coast to gradually allow a valuation of the need to stem the threat and to try to push toward the western part of the country to get investments in the western part of the countries, to get a better balance. the inequality in china is quite extraordinary. their gdp index is over five so there brave -- bright economists well-trained who are working on their five-year plan you want to go ahead in that direction. ironically the more we shout at them, the more we have to cut those chinese who are saying we ought to do this for our interests, our chinese interest. >> i basically agree with that and i was saying initially that america's problems are mainly american in origin and solution. i think that is also true of this chinese situation. i think it is widely recognized in china that the need to move

up the economic value chain and to have more domestic consumption and it is a matter of just doing it. i don't think there is a lot we can do and may even weaken it as joe was saying to encourage it from outside. >> yes, in the back. >> i'll pass on from voice of america. question for mr. chase and anyone else who wants to chime in. if you look at u.s. defense doctrine for asia and chinese defense doctrine for a show they very much the same. both countries want to be the cream imminent or predominate military power in the region. isn't that an inevitable clash and i don't necessarily mean a war but don't those two goals and desires/? are they resolvable in some way and if it is a competition, even if chinese economic and military

parity is decades away that is not very long away and don't they win that competition in the long-term? >> i will start out by saying that military parity isn't really the issue because even without coming anywhere close to parity they can create a lot of problems were the united uniteds and east asia. now, as to whether i think that some tension, some friction is probably unavoidable but the question is can both sides find creative ways to manage that tension and friction diplomatically so that it doesn't for the most part at least get in the way of the other aspects of the relationship that we have highlighted as very important and there fair i'm at least cautiously optimistic that we can. now, are there areas in which we are going to have tension? again definitely there are and even if taiwan becomes less of a potential flashpoint because of the way that the relationship is evolving, we still have maritime territorial disputes in the east china sea between china and

japan in the south china sea between china and a the number of its neighbors that i think we really need to keep a close eye on and those are potentially emerging as more likely focal points for a crisis even then taiwan i am afraid. but again with that said i think if we can try to keep the military-to-military relationship on track, a lot of that rest on the chinese side because i think it is a safe bet it that some point in the future the united states will again have a visit with the dalai lama or sell arms to taiwan or do something that frustrates and upsets the chinese and it is going to be up to them at that point to decide if they believe there is enough value in maintaining that security of cooperation of military-to-military relationship to try to see it through the next ref spot in the relationship. and we can't really do very much but encourage them to cease the mutual benefit in that of hope that they will. >> i would say that when we were designing the east asian strategy in the pentagon 15

years ago when i was in that office, we took account of this. there was a view that china would correctly want to expel the u.s. from east asia. that really doesn't make much sense. first of all they can do it by themselves and secondly, the stronger china gets with his hard power, the more it stimulates india, vietnam, japan and others to want an american presence and if you don't believe that, just look at what is happened in the last year with the -- and the issues about the south china sea. and also just goaded new delhi and talk to indians. when you get 1 inch below the surface -- surface let me tell you they are scared very much about china. it is as though mexico and canada were asking china to have bases in mexico and canada because of their fear of the u.s.. and obviously that shows you the

difference between the geopolitical relationships in the two areas. so this idea that eventually there is going to be a clash between the united states in china because both militaries are getting stronger i just don't see it. >> yes, maam. >> i wonder what is your assessment of u.s. proposals of military exercises in eastern asia and what kind of resistance do you anticipate from china and other countries? >> one of the things i try to say to my chinese interlocutors in beijing and shanghai last week was the walk to welcome the

american exercise with korea and japan because it is giving a signal to north korea not to do more crazy things as they try to assure the succession of what is the world's first communist monarchy. and, if the chinese don't do what they need to do, which is tell kim jong-il, lookout, the chinese are going to get pulled into deeper water than the chinese want to be. i can understand that the chinese want to keep a buffer state and don't want to see the collapse of the north korean regime but neither do they want to see a situation where kim jong-il tries again because he thinks there is no response after the sinking of the cheonan or the shelling of the islands. so he tries again but this time they -- a humiliated -- response in this time you have a chaotic situation. if china isn't going to do what

it is going to do this and they message to north korea then at least be glad that the u.s., south korea and japan are working together to try to send that message. even better would be for china to join in. >> bruce cain. and the executive director here. i read somewhere recently that china controlled 95% of the production of rare earth elements that are used in our modern technology, and that they are wrister ting i guess the export of its. so the question i have is, how do we get into situations because rare earth elements apparently are all over the world and yet 95% are being produced by china. how do we get into such an situation of dependence and given that kind of corporate of ideas that you've are putting

forth how does the united states respond if we are getting into the situation of dependence like that or something that potentially affects not only our civilian life but our military capabilities? >> this is not a matter -- as you say these resources are distributed around the world notably in the u.s. and probably eight or 10 years ago the u.s. was a leading producer of these. producing rare earth is a messy business. this very polluting. has many traits which make it easier anyway to do in china than a lot of other places in the world. as the chinese ramped up their production in the world price went down a lot of u.s. companies just let the business but they could easily get that can do business became a strategic issue. so i think there has been some sense on the chinese side that this is maybe a lever that has been pulled too hard and if they pull it too hard they will break the lever because the u.s. camp began its production again. >> there is a company in

california that -- and guess who is investing in it? >> i would only add that because of the environmental issues that are involved in this area i think you may see some constraints in china in the future as well as people are becoming more conscious of the environmental degradation and the company's economic growth is not necessarily the case that everyone in china will want to continue to produce at that level when they start to think more about amber matalin pat. so there are factors on that and that could change things as well. speak we are getting down to time. do you all have time to stay for a few more questions? >> before i go to my friend craig martin i want to open it up because we are at the university of california center and i want to make sure any university of california students here have an opportunity to ask a question. okay, great. [laughter] craig, they're in the middle.

.. of how you think it's going to play out and to what extent we will become more robust militarily and what you see is the path of ramifications of that region. thanks. >> i was in tokyo on the weekend and had discussions among other

things. the national defense program outline, as chipset earlier in the works for some time. it's been on for japan to have these tanks in hokkaido for the soviet invasion. it's time they started to ask what are the problems we face in what is the force structure we face? not only are there issues of coast guard and the areas around the seeds of japan, desecration of piracy, japan's access to see roots, japan wants to increase its role in u.n. peacekeeping operations. they unissued there is not a danger of wood worries me about japan is the turning inward. the second half as many students overseas. japanese companies are doing much less in terms of supporting overseas charities and things they used to do. they are comfortable and have a relaxing. the great dangers japan is not

going to contribute to global public goods what it could. the device she coined the phrase of japan becoming a global civilian power. that includes using the resources of the self defense forces for such things as peacekeeping and piracy of antipiracy measures and so forth. so i think the ntp which is an acronym for the new defense program is a hefty thing. i don't think it needs to create fear. >> weekly on this point, i first went to china when i was living in japan in the mid-1980s and one of the big surprises to me on that in their years ago, tire was the degree of anti-japanese relentless sort of propaganda out of the media? and you go to universities and somebody who is 20 or so of his grand prix perhaps the been there during the japanese invasion were voluntary and how much they hated japanese, how

the japanese always give us a bad time. there's a lot of discussion about that. it emphasizes for the japanese the need to sort of manage perceptions in china because there's a ramped up compared to 20 years ago, ramped up level of getting as much as he can in china. i guess i agree with joe about a theme that it's the price is going to china when you hear about how porous the lives. with the price of going to japan is how richard is. just it's very earner society, where everybody has everything. and i think versus inward looking and said japan and a challenge with japanese and their partners for u.s. and china is to put that to the best advantage. >> want to jump in, mike? >> i think it makes a lot of sense for japan to rearing to health in the third of the nation is nonexistent at this point. from china's perspective, their military modernization and their more assertive regional or in policy does the risk of

provoking some reactions from other countries that are going to be contrary to their own interests. in this weird to see further developments in japan, it could be well as a result of china's posture towards japan or the way japan precedes that. >> next. >> embassy of sweden. building on the question, what do you see because it is striking not africa were mentioned by securing access to different resources, oils and so on, two questions. one is do you think china will trust that the continuous free trade system where they will build two treatments on the open

market? the second, to what extent do you think china will start economic power as political means if they can also come to filling our t-bills and so on? >> so one answer to that is my magazine, the "atlantic monthly" had a great article about six months ago by howard french on this very point on china and africa. howard had been in china for a one-time and traveled across africa. also, i had a long story of the current issue about the china u.s. collaborations on environmental matters and where that's likely to succeed or fail. the chinese perspective on this say essentially we're re-creating the history of european colonialism without the weapons, without the gun belts. we're trying to have preferential research arrangements around the world is a repeal state, too. and i have a lot of sympathy for that argument. it's not proving tremendously

successful in subpar returns. there's a lot of reaction in africa and south america about the terms of interaction with the chinese. i don't think they're doing anything different from another large economic powers have done. on the selling off of the t-bills note, i think that is something which there is a kind of mutually assured destruction in the financial relationship between the two parties that each could hurt the other badly but only by hurting it out, too. so i think that's not really it possible for revenue site. the night i agree, too. >> gary. >> gary garfield from global concern. do you see it as an of cooperation as how these countries do with climate change and environmental issues that we're facing? do we have in east asia strategy for that in ways that we can

have china except for emissions reductions obligation? >> i will try and answer this one. we have a long article on just this topic about the u.s. and china are working together and sometimes at odds. 1.2 emphasizes the longer the u.s. goes without having a climate legislation is of come with a list by which it has a train particular. they say were so rich that doing these things. talking to me are still so poor? second point is china is probably less successful than advertised in the u.s. and a lot of clean energy technologies because a lot of money being spent with no result. but still they are a place where a lot of new energy technology is being told and allow the advances they appeared. i say either there is a collaborative strategy for the u.s. and china where there's no hope for anybody because basically this is where so much of the missions themselves,

investment, technology is going to be, so i'm on favor the u.s. the u.s. and china having a domain part of the interaction. >> this is one area where they are superpower. their paths in a greenhouse gas emissions and is very much in our interest to have them do better in this area. they're not going to accept a cap, but they are very concerned about reducing carbon intensity of their punitive probe. anything we can do is hope for good. one of the interesting things over the long-term disease see what happens in china were developed shale gas. those important things to get rid of their excessive use of cold which they have allowed. if they do have impressive show gas reserves, which is now being pushed forward, it's worth noticing the carbon intensity is much lower when you burn gas. >> i would just highlight also the potential area of

cooperation or at least discussion between the u.s. military and chinese military, climate change and environmental stewardship is an area where the u.s. navy has an interest in some concerns that we might be able to discuss the chinese. that strikes me as an area along with insight counter piracy and humanitarian assistance and disaster relief or it might have some common interests that is not too hard to work together. >> hi, i'm more in makati -- [inaudible] i wanted to know if you could flush out a little bit more of your comments on china's stance on north korea, kind of piggybacking on the trilateral meetings we had last week here and then a trip to china this week at the delegation and the state department. are we going another direction? >> china has two goals on the korean peninsula. one is a non-nuclear peninsula

and the other is to create the collapse of the north korean regime because they fear a flood of refugees and they also fear a flood of south korean troops into north korea. so what these two goals, they care much more about the second. and north korea has the power of the week and this new book i mentioned the future of power. one dimension of power is someone mentioned earlier is a fight at with bank $100, as was pointed out in the 30s, if the bank $100 to bank has power over me. bio billion, i have power of the bank. north korea has extraordinary power over china through the threat of collapse. the net effect of this is the chinese have not exercised influence that they could to put limits or deadlines of what north koreans do. they've done this once, where they found technical reasons why he was different to deliver fuel

until the north koreans during the six party talks. i was saying to my chinese interlocutors all last week, we better do it again because the situation in north korea and the korean peninsula now is probably danger because the north koreans may press their luck with what they think is a low-level escalation, which the south koreans are not going to take again. and in that case, the chinese are going to get into much deeper water than they are and so i kept trying to press the chinese insane you've got to, nobody smiles when the officials me. behind the scenes you better find some technical reasons why it's difficult to supply fuel as quickly as they'd like because of the north koreans don't get that message from china, as well as from our trilateral cooperation, we make it into

something this year which we will all regret. >> i biked about him now. i think interferes that could precipitate greater liberty but they need to balance that against a more realistic fear that failing to use leverage in no way could result in a deeper crisis or another provocation as he suggested that south korea needs to respond to for domestic political reasons. for china this is an extraordinarily complex issue, but one with the risks for them of using their leverage a lower than the risks of failing to use it at this point. >> and with that, i don't want to overstay are welcome and i certainly don't want to detain these gentlemen any further. thank you very much for coming. i'll point out you can read about this and anything else the ppi does on our website, progressivefix.com. you may have noticed it somewhere in the room. thank you all for coming. [applause]

>> chinese president hu jintao arrives in the u.s. tomorrow for a visit with the president, business owners and lawmakers. [inaudible conversations]

from mark ♪ happy bird day, happy bird day. ♪ happy bird day to you happy birthday. ♪ happy birthday. ♪ [cheers and applause] [inaudible conversations] from mark

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> i'm just going to say a quick word to these folks.

this is an outstanding program an example of what martin luther king day should be all about. i want to thank all the mentees and mentors who are participating. .. >> after a painful week, where many of us were focused on

tragedy, it is important to remind ourselves what is important. >> the u.s. house begins tuesday on repealing the new health care love. the effort was delayed for more than a week after the arizona shootings which critically wounded congresswoman gabrielle giffords.

he announced that he is resigning and his resignation comes -- becomes official at the beginning of next month. he offered no explanation for his decision. we recently talked to a capitol hill reporter for more on the topic. >> john bennett of the hill newspaper. did general fields resigned voluntarily or was he fired? >> by all indications it certainly looks like he was fired.

there was a lot of pressure from the senate especially pressure from the other side of capitol hill as well, but a group of senators that really pushed hard last year and their pressure god more intense as the year went on. it got more intense as more audits were done of the audits, more reviews of what general fields organization was, or was not doing and other government groups in washington also joined the push for him to resign. it looks like the administration is given in here. >> senator mccaskill told him at a november hearing, don't think you are the right person for this job. what are the major criticisms of mr. fields? >> well, one of the things that seems to be at play here is him coming from military culture

that is salute, get the job done, not rock the boat and if you think about it as senator mccaskill had pointed out, that is not what you need a special inspector in general of anything to do and certainly not someone who is leaving an effort like studying afghan reconstruction. you need someone who is going to question authority. you need somebody who is going to pull back the curtain and look at everything. that is not always the military strong suit. >> he had just fired two of his top deputies. why? >> to me, that looked like it was trying to kind of head this off at the pass and it just wasn't enough. the pressure was too much. >> president obama had been under a lot of pressure to fire mr. fields since last summer, so why now? >> well, i think this was just a matter of timing. i think now is a good time to do sometimes in washington we will

it. see this situation crop up where there is a lot of public pressure, a lot of headlines and the administration will back their guy. administrations of all stripes will back their guy and then when the dust settles and things quiet down, everyone is paying attention to other things, then they ask the individual to resign and that is exactly what this was. >> any idea of who might replace him? >> we don't have a clear list of candidates yet, but i think it is a fair to assume that we don't have another retired general or someone with a military background. i think we may see someone with a stronger auditing background, but a list of candidates is just not clear at this time. >> john bennett with the hill newspaper. you can see his articles on line at the hill.com. john, thanks very much.

retired marine general arnold fields was responsible for investigating fraud and corruption in the 56 billion-dollar effort to rebuild afghanistan. lawmakers had been calling for his departure. we will hear testimony from arnold fields and a senate hearing in november. this is just over an hour. >> general fields, welcome. thank you for your attendance today. let me introduce you to the hearing. you have -- general fields has served as special inspector general for afghanistan reconstruction since july 2000 a. general fields briefly served as deputy director of the africa center first to teach extend these at the department of defense and is a member of the u.s. department of state assigned to the u.s. embassy in iraq where he performed duties as the chief of staff of the

iraq reconstruction management office. he retired as a major general from the united states roaring glory in january of 2004 after 34 years of active military service. let me state for the record how much your record speaks of view as an american, as a patriot, and how much our country owes you a debt of attitude for your many years of service on behalf of the united states of america. it is the custom of the subcommittee to swear in all witnesses that appear before a so if you don't mind i would like you to stand. do you swear that the testimony you will give before the subcommittee will be the truth, the whole truth and nothing but the truth so help you got? >> i do. >> we'd welcome your testimony, general fields. >> thank you chairman.

and ranking member, senator brown. i appreciate this opportunity to be here today. i would say that it is a pleasure but i would be telling a lie if i were to say so. but it is a privilege as well as an opportunity, and i wish to take full advantage of that opportunity. i have worked in supportive sigar for this past basically year and a half, funding we received in june of 2009, fully funded this organization. i have built sigar from nothing but legislation to 123 very well-informed and talented stafn full assignment for 13 months to

a very dangerous place known as afghanistan. this work is challenging. i have to find people who are willing to put their lives in harm's way in afghanistan, conducting this work in the midst of a very competitive market of investigators and auditors. i am proud of the staff that we have. we have did work in 22 of 34 provinces in afghanistan, and 48 separate locations. we have reduced 34 audits, over 100 recommendations, 90% of which has been accepted by the institutions of this federal government that we have scrutinized. they are using our work. i could cite many cases but i will not at this point, but our work is in fact making a

difference. i did and i appreciate that the chairwoman, the chairman acknowledged that i requested an assessment. we would not really have undergone such a thing until, as the earliest would have been 2012. i wanted to make this organization what senator mccaskill would wish that it eat. and that assessment for which i individually and unilaterally made request was intended to do just that. my leadership has been referred to as inept. that is the first time senator that in all my life a man of 64 years of age, who has supported this federal government for 41 straight years, of which 34 have been as a military officer. i don't even allow my own

auditors to refer to the people in afghanistan as inept because it is too general a statement for any human being. i have met with many people in afghanistan from the president of afghanistan to the little children in the province. when i asked those little children, what is that on which this reconstruction effort and $56 billion that the united states has invested in afghanistan should be based. i want you to know that those children who were no higher than my niece said to me the same things that president karzai said, as well as his ministers. they want energy or electricity or light. they want agriculture. they want education and what really broke my heart is when those little little children told me that what we really want is a floor in our school. that is what we are up against

in afghanistan. we have created by way of this $56 billion an opportunity for the children in afghanistan who i feel represent the future of afghanistan as well as the rest of the people, and i would be the last, senator mccaskill and senator brown, to condone in any form or fashion any activity that leads to the -- less than the full measure of that 56 billion being used for the purposes made available. i want this subcommittee to also know that i take this work very seriously. why? because i raised up in south carolina in a family not unlike that in afghanistan, where the level of education from both my mother and father was less than fifth grade. but nonetheless, the best training that i have received in my life came from my mother, who

had less than a fifth grade education. i wish that someone had brought $56 billion to bear upon my lify important position, trying to influence what is going on in afghanistan to the best of my ability, using a very knowledgeable and competent staff at which to do so. i raised up hard ladies and gentlemen in poverty myself. i worked for less than $1.50 a day, about what the average afghan makes today in the year 2010. on the day president kennedy was buried, which was a no school day for me, my brother and i shoveled stuff out of a local farms that they tank with a shovel for 75 cents per hour for the two of us. i know what it is to live in

poverty and i know what it is to have an opportunity in my country has given me that, and by which i am pleased and very grateful. i will do my best senator mccaskill and senator brown, to measure up to your full expectations. i appreciate the emphasis that you have placed on contracting in afghanistan but i want also to say that the legislation i am carrying out his three dimensions. contracts are not the exclusive one but i will agree with you, that is where the money is and we should focus more on that but i am also tasks to look at the programs as well as the operations that support this tremendous reconstruction effort and i promise you senators that i will do so. thank you. >> thank you general fields. general fields, i certainly respect your life story and what

you have accomplished and no one -- i can speak confidently for senator brown and every other united states senator and no one questions your commitment to the united states of america. that is not the question here. the question here is whether or not the important work of the inspector general and afghanistan has been fulfilled and completed and especially within the timeframe that we are working with because of the contingency operation. you submitted 12 pages of written testimony for this hearing. less than one page of those 12 address to the serious deficiencies found in your peer review by other inspector general's trying to measure the work of your audit agency against the standards that are required in the federal government. you did say in your testimony that strengthening our

organization and you have now made changes. let me talk about the law that you are operating under. the law that you are operating under, i am sure you are aware, requires a comprehensive audit plan. are you aware of that general fields, that the law requires a comprehensive audit plan? and, when did you begin work on a comprehensive audit plan? >> we began work on a comprehensive audit plan senator when i published a report in which it became evident in how we plan to proceed with this very new organization. in that report delivered to this congress -- i am sorry. in that report delivered to this congress, at the end of

october 2008, i laid out exactly in general what we would pursue and i'm pleased to say that at the top of that list is in fact contracting. that was followed up with the hiring of mr. john brennan as my principle auditor. >> when did that higher occur? >> that hiring actually occurred the first week of january of 2009. that is one mr. brummett actually reported aboard that we commence the process of bringing him aboard of course much earlier than that. >> you at been at the agency how long when he actually joined the agency? >> i have been at the agency. >> since july 2008, correct? >> that is when i was sworn in, yes maam. >> in the audit plan the law requires and i am sure, i hope, the first thing you did was to look at public law 110, 181, 122

statute 235 and look at the statutory requirements of your job. that plan that was required lays out that it must be consistent with the requirements of subsection h which are the audit requirements that the congress placed on sigar. are you familiar with the audit requirements and subsection h. general? >> in general, yes i am. >> could you tell us what those requirements are? >> that we would conduct thorough audits of the spending associated with our contribution to reconstruction in afghanistan >> i'm not trying to play gotcha here, general, but there are seven requirements in section h and i'm going to lay them out for the record and after i do each one i would like you to tell me if that has been completed and if so, when? the first one -- tieser the

things at a minimum you are required to examine a special inspector general. the first one is the manner in which contract requirements were developed and contracts were cast and delivery orders were awarded. has that been done by sigar? have you examined contract requirements in afghanistan and contracts and delivery orders how they were awarded? as has your agency duh at this date? >> we have conducted several contract audits. each of those audits has addressed matters associated with how contracts came about. >> how many contract audits have you completed? >> we have completed about four contract audits. >> and you have done four contract audits but isn't it true that all of those have occurred essentially in the last

12 months? >> that is correct. >> number two, the manner in which the federal agency exercised control over the performance of contractors. have you done that's audit work? >> we have examined in each of our audits the extent to which controls have been in place to guard against waste, fraud and abuse of the american taxpayer's dollar. in so doing, yes maam, we have looked at those matters as they relate to contracts specifically in those areas in which we have conducted focused contract audits of specific initiatives for which funding is being available. >> alright, so the first requirement dealt with contract requirement and task and delivery orders. the second requirement, the medal of control over contractors of the federal government. number three, the extent to which operational field commanders were able to chordate

or direct the performance of contractors in the area of combat operations. has that work been done? >> senator the very first audit that we conducted was an audit, a contract being supervised, which was responsible for the oversight of training and equipping the afghan security forces. that contract is worth $404 million to the american taxpayer. >> and how many audits have you done that address the oversight of contractors by field commanders? >> 40% senator of our audits have either been direct audits of focused contract audits or contract related auditing. >> i thought you said you have done for audits on contract. >> i said for audits, because i was referencing for focused

contract audits, which were of multi-million dollar infrastructure initiatives, specifically associated with the standup of the afghanistan security forces. but i am also saying that we have looked at contracts from not so much focused contract and that it does not necessarily address a specific infrastructure initiative, but those audits address contracts in general that relate to the standup of the afghanistan security forces and other initiatives in afghanistan. >> number four, the degree to which contractor employee -- contractor employees are properly screened, selected, trained and equipped for the functions. is their report he could point me to or where i can get reassurance that we are doing adequate selection, training equipping and screening of contract for snell and afghanistan?

>> senator the very first ad -- audit once again that we published, the 404 million-dollar contract we found in that audit that first the supervision of that particular contract was inadequate. whereby the actual entity, the expert in contract was really living in maryland and not physically located on a permanent bases in afghanistan. >> how many contracts are operational in afghanistan right now? >> i don't know, senator. >> can you give me a ballpark? >> i know based on our most recent audit there are between 2007 and 2009, full contracts for which we could find information at that point in time, 6900 contracts among which i am confident are a number of the type that you just mentioned. >> okay, so i have asked several questions in each one you refer

to the same audits of one contract. so well for 6000 -- what did you say the number was? >> 6900. >> so we have almost 7000 active operational contracts and there have been for audits completed of those contracts? >> the 6900 is a rollup of contracts in general regarding afghanistan between the years 2007 and 2009. how many of those might he redefine this operational contracts i don't know. >> you don't have any reason to believe that has gone down, do you? >> no maam. >> in fact it is probably ghana. >> absolutely. >> absolutely. than excellent, nature of misconducts are unlawful activity by contract employees. how many audits have you done that would reassure the american people that you have in fact looks for, found or are

confident there is no unlawful activity by contractor employees? >> senator i would say in each of the 34 audits that we have accepted, that those matters have been of concern, but each of those 30 for audits may not necessarily have been directly related to a contract. >> how many findings have you issued dealing with my misconduct are unlawful activity by contractor employees? how many findings in these audits? >> i don't think that we have identified misconducts per se. we have identified issues that we have given to our investigation for further follow-up. and i can specifically. >> i am sorry,. that's okay go ahead. >> i can specifically tell you of a specific audit that we conducted which started out as a general audit of the kabul power

plant, an item worth $300 million to the american taxpayer. during the course of that audit, we found anomalies that we felt were investigate toward in nature so we tailored and shortened the scope of our audit and the rest of those matters were turned over to our investigators and they are still being pursued. >> the remaining two requirements in terms of audits that must be performed, the nature and extent of any activity by contractor employees was inconsistent with the objection of operational field commanders and finally number seven the extent to which any incident of misconduct are unlawful activity were reported, documented, investigated and prosecuted. to what extent have you been able to produce a report as to how much unlawful activity has actually been investigated and prosecuted?

>> i don't have an answer for that question at this time, but i will assure the senator that as we conduct our audit work, and as we conduct our investigation were all of those matters are in fact taken into consideration. >> thank you general. senator brown. >> general thank you once again. i mirror general mccaskill -- senator mccaskill's kind words about your service. i greatly appreciate that service them and noted in your testimony you have great concern for the afghan children and the needs of the people of afghanistan. i understand that. i also have however a great concern about our soldiers and the men and women that are fighting and also the taxpayers who are providing $56 billion. it doesn't grow on trees and that being said, i know you have been in a the position since july of 08 and the last panel

you heard noted serious deficiencies and management deficiencies during their review. now that you've held the office for over two years with major course corrections are you currently taking to rectify the serious deficiencies? >> that was the month during which i was privileged to be sworn into this position but funding for sigar did not really come until much later. that is why i pointed out that we did not receive full funding for this organization until june of 2009. but,. >> so noted and that is a good.. >> thank you senator but in reference to course corrections, one of the reasons i asked for this cd to come in early about

two years in advance of the time that it normally would have as we anticipated, was to help me set the course correctly for this organization and i am using the results of both the audit, the investigations and the so-called capstone review of sigar to help chart the course. so i have put in place as of the 30th of september of this year if the recommendations and suggestions made by the review team. >> and how have you done that? what specifically is the biggest thing where i think senator mccaskill and i are concerned about, which is the money. i know you have done good reports and investigations on other things that you commented on, which is policy issues relating to do the ability for the afghan people to live and

grow but in terms of the things that many taxpayers right now are concerned about are the dollars. they are growing wary and want to know where their money is going. what actions based on recommendations to to you have in place? >> thank you senator. i am a taxpayer as well so i have as much interest if not more in my particular case is the individual american taxpayer. we are doing a better job of risk assessment. we found that to be a weakness to which earlier attention in a much more pointed way should have been turned, so we are improving the means by which we determined where it is that we should focus our effort. >> and where is that leading you now? >> well, it is leading us to a greater focus on contracts because that is and that's where the money is. but as the initial questioning

by a madam chairman, we have to also address the front end of this reconstruction effort. to what extent are the policies being put in place by those who are implementing this $56 billion. >> i understand that and i respect that approach but right now, now that you have kind have been put on notice that everybody that hey we understand the policies and all that stuff but with specific we are you doing now based on the recommendations that you have been given? wets are you specifically doing so i can tell the people back home in massachusetts and all the viewers we have, where are you focusing? give me some specific examples so i i can advocate and say hey maki is kind of learning. he is learning and growing. he has taken this body had gotten the funding after being sworn in and now he has been given an independent request audit and, so give me some

specific examples. i don't want to beat a dead horse about i know -- need to know where exactly you are focusing. are you focusing for example on how the head taliban is getting money from us taxpayers? are you focusing on that? are you focusing on the bribes and payoffs? are you focusing on the fact that the afghan army after the six plus billion we have spent a still not up and running? where you focusing exactly? >> sir, we are focusing on several broad areas, but at the top of that list happens to be contracting. >> what specifically and contracting? what area are you looking at? are you looking at ridges, roads? what are you doing specifically. i know contracting is so big. we have 7000 contracts are more. have you actually in -- initiated investigations already

>> sir we have 89 investigations going on as we speak. they are focused on fraud and theft. >> based on that what types of things are you investigating? what examples can you give to me and the american taxpayers of what your initial -- what you are seeing? what made you go to that particular area versus another area? >> because that is where we feel it is for the american taxpayer. >> based on what? some tipoffs? some prior types of contracts? why did you specifically want to go for that area? >> based on all of the above, sir. >> okay. can you share your thoughts about how we can strategically deal with this very complex challenge. in your testimony you stated your concern about the role and cost of private security contractors specifically as it

relates to fueling, corruption and financing and strengthening criminal networks. what tangible actions are required to try to differ this corruption? what are you thinking, what can you tell me about that? >> sir, i believe that the fight against corruption must take place on several levels and many dimensions. the first of which we need to give consideration to what it is that we are doing in support of the reconstruction effort and the government of afghanistan. we are conducting a reconstruction effort and three broad areas, security, governance and development. and each of those we feel needs to be addressed. we are devoting and have devoted $29 billion to security in afghanistan itself. i stand above security forces and army.

we have devoted $16 billion to governance and development and therein lies the vulnerability of the american taxpayer's dollar, so we are pursuing audits and investigations that will help mitigate the potential for the american taxpayer dollar to be wasted, fraud or abuse. >> i know you are getting $46 million to complete their mission. that is a lot of money and i note here in the chart that senator coburn referenced you basically identified in terms of fraud, waste and abuse about $8 million. 46 have been given and $8 million in the timeframe. can you tell me and us why there hasn't been more of a kind of a collection on that fraud, waste and abuse up to this point? >> sir, a contributing factor is the slow start that this organization had been standing

up, a part of which i am inclined to attribute the lack of funding. >> i am going to give you that one because i am something -- you need to get it up and funded and get it running. let's take the last nine months for example. have you had success as you could share? >> $6 million we have reported in our recent report. we have an ongoing forensic audit of $37 billion looking at over 73,000 transactions from which we intend be factored towards crime or potential crime and we are moving in that direction so we are using four and six as means by which to fairly quickly identify the vulnerabilities and then our structuring audits accordingly. >> one final and then i will turn it back. in your latest sigar quarterly

report on page 6 of mentions afghan private security contracts, think it is what tone risk management has been suspended and debarred after was found bundling large sums of money to insurgents. i met with general petraeus on many occasions concerning our afghan policy and i agree with him that we must be better buyers and buying from better people. what oversight actions are you taking through your audits and investigations to prioritize general petraeus' directives that those funds will be given to better people and not to our enemies? >> fursfirst, i applaud general petraeus and the initiatives that he has taken to address this issue of corruption. the standup of task force 21 is one of those very significant initiatives. we are working very closely with task force 2010. we are also working with the international contract corruption task force in order

to harness the investigatory initiatives of the federal agencies so that we can bring -- to bear upon defining folks who are bilking the american taxpayer out of money. >> general fields, and your testimony to me a few minutes ago you referred to the sea sticky audit. the first audit you did. >> yes, maam. >> is that correct? >> that is correct. >> of that do you recall how long that audit was, how many pages? >> i don't recall how many pages but i'm pretty sure it wasn't a very large audit senator. >> does 12 pages sound right? >> that may be about right. there is a summary of that

audit, yes maam. >> how many pages in that audit actually contained audit work? >> i would have to review that audit. >> does for pages sound correct? >> may be, senator. >> the other oddity referred to in the previous testimony with the audit on the kabul power plant? >> that is correct. >> had the similar audit been done by usaid exactly one year prior to the time that you did that audit? >> that is correct. >> and let's talk about the funding of your agency. usaid did a very similar audit to the one you did one year prior on the kabul power plant. do you know what they funding for usaid has been in terms of their inspector general work in afghanistan over the last, how many, five, six years? do you know what their total funding has been? >> funding for usaid in terms of its operations in afghanistan?

>> $10 million? do you see what they have recovered for a 10 million-dollar taxpayer investment? 149 million, and you have received $46 million? is that correct, general? >> 46.2 million to be exact. >> you will have recovered a $.2 million? >> at this point in time, yes. >> can you understand is not address a look at those numbers it is very hard for me to reconcile the notion that i lack the funding has been your problem? >> senator, the recoveries that we have thus far experience are small, but the full measure of the outcome of audits and investigations that are underwas not thus far been determined. are forthcoming numbers will be much larger than the numbers be submitted to the city -- sigi in

their rollup of work that the federal community in general, federal ig's in general have done for 2000 mind. >> let's talk about contracting. you know, one of the things that is very important is how auditing because your job is to oversee contracts and your job is to determine if they are contracts that are not needed, put to better use, and out of the $46 million that you have received, how much money are you spending too delayed and to check just to repair your reports for congress? >> that contract senator started out at 3.7 million at a time when we had people to do the

very specific type of work for which we have contracted to help us. the intent of that arrangement was to facilitate the gaps in our own personnel and the skill sets that were needed at that point in time and over a period of time we would commensurately reduce that contract as we were able to bring that particular level of talent aboard in sigar and we are doing that senator. >> alright, you spend 3.7 million and 2.7 million this year for deloitte and their only function is to produce reports to congress, correct? >> deloitte provides also assistance to us in databased management. that is one aspect of it. but they assist sigar in putting together the reports that we do submits to congress which is a very detailed report, a very

important report and we feel that the extent to which we have gone to ensure that report is put together correctly and is presentable to this congress is commensurate with the money that we have invested in deloitte and touche to do so. >> i want to clarify this because i will tell you candidly i don't want to layout my fellow members of congress here, but an investment of that kind of money and a report to congress when there is a kind of audit work that needs to be done and when you you are using a lack of funding of one of the rationales because of why more audit work hasn't been an white is taking so long for audits to be done in a matter what the size of your agency. let's compare here, the contract totals of deloitte and touche a $6.69 the total amount of funding to aig is $10 million for that 10 male and dollars we

got $149 million that. meanwhile with 6.6 million with deloitte and touche albeit gotten is a shiny report and pretty pictures for members of congress most of which we will never see. do you understand why that causes one pause about whether or not that is a strong leadership decision general fields? >> senator we have been told by members of this very congress that they appreciate the report that we have provided for them. similarly, the federal community also where have told us that they appreciate the detail and the correctness of the report that we produce. >> let's talk about the contract of joseph schmidt. you have an audit and it is completed. your peer review is not good and in fact for only the second time in 50 peer reviews, you have been recommended to loser law enforcement capability in an arena where desperately needed to law enforcement capability is absolutely essential. you have had this audit and after the audit is done, you

hire someone it is my understanding, to help you monitor compliance with the audit recommendation. is that a fair characterization of what you are contract with joseph schmidt was supposed to represent? >> that is a fairly fair characterization, senator. but we hired this independent monitor commensurate with a plan of action and milestones that i put in place in response to the result the city in order to move sigar weekly along to putting in place the corrective action that had have been identified for us. i set that date at 30 september of this year, and we are a better organization senator because we have this external agencies to come in and provide us this particular expertise during that period. ..

>> that's the document that the information in the document, for the justification and approval of a no-bid contract. >> senator, we wanted to quickly pointed out that appear at all. we did not wish to lose or put in jeopardy any further of the authorities for criminal

investigations that have been provided to me by way of the department of justice. and we felt that this entity would provide that independent look at us and we felt that would help mitigate any concerns that this congress and the overseers on capitol hill of sigar might have as well as to reassure anyone else who might be interested in the out come of thee. thou. >> is in it to an independent monitor whether or not you complied with the monitor now? >> archer looking out to see if they complied with the idea? are they the independent body are looking for in terms of seeing if you have in fact >> cd is not looking at the odd piece, but the investigation piece has yet to get underway, but nonetheless i have made requests that they come back in. >> and so, the army contracting command to award the contract on

behalf of sigar said this contract was a sole source because there is only one person come mr. schmidt who is available and qualified. did you reach out to any other retired tai chi is if you are going to hire someone else to come in and tell you whether or not you are complying with the other? >> not at that time, senator. connected u.s. for suggestions for mr. reimer or more importantly mr. moore? >> no, we did not. >> could you talk to them about using mr. schmitz? did you talk to mr. moore and his team committed group of independent peer review auditors will put that your process and quality controls and criminal investigation, did you discuss mr. schmitz with them? about hiring mr. schmidt? >> no, i did not. somebody made dents on my behalf, but i did not personally. >> what my staff spoke with your staff in september they had expected mr. schmidt would be

entering into a subcontract with louis freeh, the former director of the fbi who also worked with mr. schmidt on the independent monitor team for donnelly -- donna chrysler. sigar officials say they believe he would be intimately involved in the outreach to attorney general holder. was that your understanding? >> that is not necessarily my understanding and i cannot account for what folks may have communicated to your staff or to anyone else. my intent, senator come was to bring aboard an independent entity to provide the oversight of the plan of action that we were putting in place to move this effort quickly allowed so we could come in compliance with the department of justice regulations. >> did you expect that mr. freed would be working on this contractor, general fields? been excited at the outset, yes,

ma'am. i had confidence -- >> what was this function is related to what you're accident to do? a reach out to general holder? >> no, ma'am. i did not expect anyone to reach out per se. i expected the oversight being provided by this entity to help sigar and the inspector general correctly issue would have been pointed out. >> well, your staff said to last that mr. freeh would be intimately involved with enough reach to general holder. you understand what this looks like, don't you? >> i would assess the senator explain what you're referring to. >> it looks like you all went out and found somebody who could get to louis freeh, who took it to attorney general holder and make sure you didn't lose your ability to exercise law-enforcement function. it looks like you are trying to hire someone to help influence the attorney general of the

united states as opposed to fixing the problem and then having the same independent audit group come back and certify that you fix the problem. >> senator, as inspector general had confidence in mr. freeh because he is a former direct or the fbi, because he is a former judge and because as i learned along the way, mr. schmidt was associated with his firm ended in which i had confidence because the mr. freeh's constitutional to this government and mr. schmitz constitution to the government in april that i was playing at that time. that was my line of thinking that had nothing to do, senator, with any other potential influence in reference to the attorney general. i want to correct the issues

that have been pointed out to me by that. i'll end that was my only object to us. >> it is my understand that mr. morris team come of this contract was worth $100,000, correct? mr. schmick a 100 grand? >> no, senator. the contract is worth 95,000. >> tuesday, $95,000. in how many days did mr. schmitz work on this for $95,000? >> he was with sigar for approximately two months. >> so 60 days and he got 95,000? >> that is correct. >> so about $45,000 a month? >> senator, we followed the rules in engaging in this contract. we utilize the contract center of excellence that many other entities have used in the

$95,000 was the fair market value for the specific work we were requesting. >> with all due respect, general, i've got to say the truth. you are supposed to be finding ways to save the american taxpayers dollars. and please, i don't think it's a good idea to say was fair market value to pay somebody $45,000 a month to try to fix the problem in your investigations unit to the satisfaction of the attorney general. isn't it true that mr. moore is going to complete the work in just a few days and isn't going to cause anything in terms of determining whether or not you now have the proper procedures in place to do line for the work of the special inspector general of afghanistan?

>> senator, i believe the decision i made that point in time was a good decision. i did not anticipate all of the scrutiny that this particular initiative has received since that decision. had i had an opportunity -- if i had an opportunity to do it all over again, i probably would've made a different decision. >> that's good news. that is good news, general. senator brown. >> thank you. i just have a couple of questions. in fy 11, general, you slated to get $16.2 billion. if approved, with the money be tracked and how will it be measured? somewhat expected return on investment would you expect the taxpayer to get? >> senator, we would expect that the full measure of the 16.2 billion, which is primarily

designed for printing and equipping of the afghanistan security force. we expect a full measure of the taxpayer's investment in terms of a return will be achieved. to that end, we have asked for additional funding for sigar so that we can increase the numbers on our staff so we can provide the coverage and oversight necessary to ensure the american tax payer that money is completely used for the purpose for which it was made available. >> when you say full measure, what does that mean in layman's terms? full measure? >> well, and others in military and there, i get it. when you expect to get the full measure, what does that mean exactly? full measure means, sir, that the 16.2 billion was requested for specific initiatives associated with the standup of the afghanistan security forces. so the full measure means the

16.2 would be exclusively used for that purpose without waste, fraud and abuse. that's what i'm referring to, senator. >> i see this 25 billion correctly -- how much do you -- how much are you going to spend in personnel compensation? do you have any idea? >> personnel compensation not unlike the rest of the federal community is highly. our personal compensation is, i believe, commiserate with my sigar counterpart. our staff who work in afghanistan by way of a compensation package approved by this congress, as received 70% in addition to their regular pay for danger pay and location page. we have to pay that, senator. sigar is an independent agency.

i must pay as we go for everything received, personnel and otherwise. the cost is very high, but we also are a temporary organization, senator. so when we bring people word, they know that. we bring people word for 13 months. it's not like they're standing and statutory federal agency and the inspectors general for us. we are also competing in a market where 70 other aspect is general in this city are looking for auditors and investigators. and we have to compete in that guard their compensation in order to bring forth the level of power we need. i wish it were cheaper, senator, i certainly do. >> let me just finish and then i'm going to move on biblical want the next panel. in aware that they can to focus? i just want you to. i want you to find out where the money is going sincere win on the taliban issue, why and how they are getting any of our

money's number one. how much know if there's any bribes and payoffs of criminal activity going on for the money should be going, if there's people doing it, then what we're going to do to stop it and plug at least, you know, and i understand, but not for you telling me, i would have overlooked the fact you've got a point and then there was a transitional period. so i get that. but now that she's done all the women and elections in the policy stuff in the focus they, i think the message for me at senator mccaskill and the folks that is your independent audit, i commend you for reaching out and doing that. even i was a cia situation very seriously wanted to actually get there and get some guidance because maybe was new for there was many guidance, but they've given you the guidance. i think were given you some guidance. please protect germany, find a way to bring that number up so we can feel confident the

millions we give you to get billions in return. at least make it a wash. that's my only message and have nothing further. thank you. >> for the cleanup a couple of things. i don't have a lot of other questions. in fact, louis freeh never once engaged to decline to participate in anybody in this contract, correct, general fields? >> that is correct. senator, as far as i know, what assistance mr. freeh made given mr. schmidt that i'm not aware of you not able to comment on that, senator. >> i've not gone into the issues surrounding mr. schmidt and his previous tenure at the department of defense, but we were at the time he hired him that there'd been some controversy concerning his previous tenure at the department of defense inspector general? >> senator, i was completely unaware. >> by would've been a vet you would've done, a basic google search for his name that would've revealed there was

vexing questions asked he would've had a chance to ask them before you hired him and be clear there weren't any problems associated with them? >> senator, our initiative was to engage the louis freeh group of which mr. schmidt, to our understanding was made part. >> so now you've said that the reason for hiring him was to get to louis freeh, to engage fully free? >> not necessarily, senator. the reason for hiring any of these entities was to help bring the talent and expertise that we needed at that point in time to address the issues in sigar. >> i said why didn't you bat him and he said were hired him to get to louis freeh. >> i did not say that. >> would start again. but it should not that mr. schmidt before you hired him? >> i personally had no cause to

do so. these matters, senator were being handled by way of my contracting officer and by way of the cce. i did not have any reason to doubt the integrity and so forth by mr. schmidt. and as i understand it, the issues of which he may have been accused of doing his tenure as inspector general and this is information i found a subsequent to the senator having raised questions about my decision in hiring this particular contractor. but as i understand it, the issues that were brought up concerning mr. schmidt were not cooperated in the final analysis. >> you understand the reason this even has come up about mr. schmidt is weeded basic investigatory work. and when we did basic investigatory work, we found that senator grassley had a lot of questions about mr. schmidt

when he was inspector general dod. and i'm not saying whether senator grassley was right or wrong. i'm saying this very troubling that he would not be aware of those questions before paying someone the amount of $450,000 a year to do work for the federal government. general fields, that is what i'm getting at. this audit agency is careful about who they hire and whether or not there is any appearance of a problem. i'm not saying the problems and the fact you didn't even notice there might be one that's what i'm trying to bring to your attention. did he ever go to afghanistan? >> not under the contract involving sigar to my knowledge. >> said the pay for him to chew claim his market value, $45,000 a month did not evolve in a high risk other than colin louis freeh's office? >> potentially, correct as far as i know, senator.

>> let me also say, senator pat mr. schmidt is a registered government contractor, registered to contract with the government of the united dates as far as i understand. >> i understand, general. but the point i'm trying to make is your job is to oversee contract. your job is to set the gold standard on contracting, so you do a sole source contract, no bid. you immediately hire someone, clearly there wasn't even a vet done goes back to your attention there were questions you need to ask him about his previous service as inspector general. that's the point i'm making, general fields. that's the point i'm making. have you ever done or worked with an audit agency before you were given this job? have you ever done any audit work or been around any auditors

before you were given this job? >> yes, senator, i have been. >> okay, tell me what capacity would work with auditors prior to taking this job. >> i were with auditors in conjunction with my support to the direct management and reconstruction office worker mel. this was in direct work associated with reconstruction in support of iraq. >> what all did you work with? >> i did not specifically work with a knotted agency per se, but in chief of staff, my work covered multiple dimensions of reconstruction in iraq. prior to that, senator, i served as the inspector general for the united states central command. i did that work for two years

and that work involved some degree of oversight, involving audit type work, but not necessarily the professional audit by which sigar is currently carried. >> right, in fact it's something the public is unaware of that there is a vast difference with inspector general's in the active military and within the federal government, correct, general fields? be inspectors report to the commander and that there is as near as a commander. they have no duty to report to the public or congress or for independent function in terms of monitoring taxpayer dollars, correct? >> those inspectors general are guided to the basic intent no less of the inspector general act of 1978, by which i and other federal inspectors were as well. >> i understand. i was shocked when i went to

iraq on may 1st contract oversight trip and i'm sitting with the inspectors general and i didn't realize there were passage of the federal government. i wish they were called the same thing. i went to rename the military inspector general's another name a name for me that the name first. so it got a little tricky. but these are not the same functions and they don't do the same work. and i guess the reason i ask this question, general, is the first thing you do if you have an audit agency is just to figure out where the risk is and do an assessment in a tiered analysis as to what tier is the top tier and were the highest risk is, then you go down and then you do your audit plan, determining how much resources you have and how you can get the most risk. at what point in time was the risk assessment completed at sigar? >> i will go back, senator, to what i said earlier.

we conducted a risk assessment which was published in our 2008 report to congress. that risk assessment was made up of several elements. it may not look like a risk assessment as the senator -- >> is on the yellow book risk assessment is that, general fields? >> it would not be a yellow book assessment per se, but it was certainly contain the elements relevant to any risk assessment when it comes to oversight of money. >> to the editors working for what that timetable is sufficient in terms of a yellow book risk assessment? >> i had no auditors at that time because we completed the assessment in conjunction with the report to congress when i was privileged to hire my first auditor. >> so you are saying to you performed we would consider professional risk assessment of the major responsibility in terms of audit function without any auditors?

>> i performed that assessment, senator, with intelligent folks and i feel that this is not -- i don't feel that this is necessarily rocket science in order to determine what needs to be done, senator. >> i've got to tell you the truth. once again i do not mean to be cruel. this is not fun for me either. it's very uncomfortable to say that i don't think figure the right right person for this job, general fields, but i don't think your the right person for this job, please, no, that is very appropriate. please leave the room. [inaudible] >> please, please. [inaudible] >> the risk assessment -- the

reason that you had findings of peer review was because you fell short of the professional standard that are demanded in the world of auditing. and i'm not saying that people who worked for you weren't intelligent. i'm not saying you aren't intelligent. i'm i'm not saying your i.t. euro, sir. i'm saying this is too important to the government function to not have the third-highest level of experience qualifications and expertise fighting this kind of audit agency. n. echo other questions for you. we will keep this record up and if there's anything that i've said in this hearing you believe is unfair, if there's any information you want to bring to our information attention, we'll keep the record of the hearing opened and i assure you look at it with the eye of a knotted or an examiner make sure our final record in this hearing as fair and balanced and we're happy to

include anything you'd like to include maintaining mainframe and try your service across america. >> thank you, genoa. 20 thank you for services for that i appreciate your forthright answers. thank you. >> thank you, senators. >> and we will now take the third panel. [inaudible conversations] [inaudible conversations] [inaudible conversations]

i'm not >> john bennett, defense reporter for hill newspaper. the general field resigned voluntarily or was he fired? >> by all indications it certainly looks like he was fired or asked to resign. there was a lot of pressure from the other side of capitol hill as well. but a group of senators had really pushed hard last year and their pressure got more intense as the year went on, got more intense as more audits were done of the audits, more reviews of our general fields organization was or was not doing in other

good government groups in washington also joined the push for him to resign and i would think the administration had given him. >> senator mccaskill told mr. fields in a november hearing, i don't think your the right person for this job. what were the major criticisms of mr. fields? >> well, one of the things that aims to be a play here is him coming from a military culture that is to loot and get the job done, not rock the boat. if you think about it, senator mccaskill had pointed out, that's not what you need a special inspector general of anything to do with certainly not someone who's lived enough for like study and ask him reconstruction. you need someone is going to question authority, someone who will pull back the curtain and look at every ring. that's not always the military strong suit. >> you just heard two of his top

deputies. why? >> to me that look like he was trying to have the salt that the path and the pressure was too much. >> president obama had been under a lot of pressure to fire mr. fields since last summer. so why now? >> well, i think this is just a matter of timing. i think now is a good time to do it. sometimes in washington will see this situation pop up with a lot of public pressure, and a lot of headlines in the administration will back their guy. administrations of all stripes and when the dust settles and quiet down, everyone is paying attention to other things, then they ask the individual to refine and that is what this looks like.

>> any idea who might replace him? >> i don't have a clear list of candidates yet, but it's a fair to assume that we won't have another retired general or someone with a military background. i think we may see someone with a stronger auditing background, buddy list of candidates is just not clear if this point. >> john bennett, defense reporter for the newspaper. because the article is online at dell.com. john, thanks very much. ..