the second presidential debate is 7:00 p.m. at washington university in missouri. boettcher live coverage of the event 30:00 eastern for ap view of the debate. >> as the nation of the president in november, america will have its first foreign-born first lady since lisa adams or will we have a former president as first gentleman. learn more about the influence of america's presidential spouses from c-span's first lady now available in paperback.

>> a pan of global finance experts discuss the impact of china's currency and emerging markets specifically in the latin american region. the olympic council hosted this event. it is about 90 minutes. >> good morning, everybody. i am chair of the anti-council

and we are indeed delighted in grateful to have you all with us. thank you for being here today to discuss the topic that has the former u.s. ambassador to china is very near and dear to my heart. and that is shining and it's exhausting global role. we are delighted to be able to unveil the latin america centers latest report titled a globalized -- will reshape latin america. dieter schecter here and we're grateful for his leadership among many others on his team. thanks enormously to our generous partners at hsbc represented here today by their chairman of global banking for the america and atlanta council board member jerry meadow. jerry has become a great friend over the years and i am absolutely delighted that our interests lined up to allow for this kind of special partnership

. it is a partnership that goes far beyond today's discussion in an event in mexico city next month. over two years with hsbc support we will look at issues critical to the charter latin america relationship from investment to trade to energy issues with report launches and events in washington, new york, china and various latin american countries. so stay tuned for more programming on this hugely important set of issues. i would also like to say a very warm welcome to the executive vice chair of the atlantic council board adrianne karsh who is with us in the audience today. adrian, thank you. adrian is in large part responsible for division of disorganization and the work across a range of issues, which

have been so successful in recent years. she really is a remarkable driving force and we thank you for so many good deeds you do for this organization. today's discussion is on a topic which requires global attention beyond just the financial world. i am delighted to be joined by a distinguished channel of experts to discuss the profound impact of running these internationalization and the impact it will have particularly in latin america. our event comes at a critical moment is just on saturday they became the fifth global currency to be accepted as an official reserve asset by the international monetary fund. this is a giant step forward for china, a telling moment in the emergence as a global economic powerhouse. a country cannot america such a sale and arjun tina that already have substantial trade and investment partnerships with china, this development could

further improve bilateral cooperation. however, it is vital to consider the broader ramifications to run in these internationalization will have another latin american economies as well as this implications for the massive economy. today's discussion will delve into the meat of these issues providing further contacts to the report's findings into china's highly complex relationship with latin america. after a great jury to say a few words, we will have to separate panel discussions. the first one moderated by sam fleming of the "financial times" and then by jason inmarsat, director of the adrian part owner for latin america economic growth initiative. please remember that today's conversation is off the record -- on the record as being light streamed online. i encourage all of you to treat about the event using hash

tag -- thank you for joining us today and it is with great honor that i now turn the stage over to jerry motto. thank you also very much. [applause] >> good morning, everyone and welcome. thank you, governor for your kind remarks. it is such a pleasure to be working with you in the atlantic council on this important endeavor. your remarks really encapsulate why now is such an important moment to host this event. the international research. this is also timing for us to publicly launch but the atlantic council, an institution known for its mission and institution with whom i share many core

values. without being redundant, during the two-year will dive deeper into issues of trade, investment, energy and security in the china latin america relationship with events around the world. we had a very successful roundtable in new york a few months ago which also feature an impressive group of people. i would like to thank those participants as well for helping inform the report. finally, thank you to douglas as well as the team at the atlantic council for producing another high-quality publication. so why focus on the relationship and why now? after nearly 2500% increase into the trade since 2000, the terms of the china latin america and relationship on the cash of change. it will make trade and investment between the two

regions a more seamless transaction. the same time it will be transaction saving for hundreds of companies allowing america and other emerging markets. there is some risk involved. the infrastructure is still being built. what is the next latin american relationship and what are the implications for the western hemisphere. will it be reshaped in the region? today hsbc and the atlantic council are looking forward highlighting this issue. this discussion is not about winners and losers. the opportunity to be overcome and we have a lineup ready to explain where china, latin america and the u.s. will find those. with that, i will turn it over

to our first panel. thank you very much. [applause] >> good morning, everyone. and sam fleming, the u.s. economic senator at the "financial times." a great pleasure to be here with the superb panel. as a giant leap forward for a china inclusion in the fbi in a historic moment in terms of economic development for china and the world. the ramifications are huge and that is why we are here to discuss this morning. let me introduce an excellent panel to talk about these issues. on my immediate left is doppler

hanna from the faculty of law at hong kong university and co-author of this morning's report for latin america. on his left is an advanced professor of international at johns hopkins and also a distinct fellow at the dallas fed. on the far left is applied. clyde waddled from the heat on emerging markets strategist foreign exchange strategist. can i start with you? do they talk about the report. obviously huge ramifications in this internationalization. one of the arguments you make is the ramifications go well beyond treasury in central banking. perhaps you could spend a couple minutes outlining a thing in the global u.s. economy and china's economy. >> answer that and also thanks to the council for being here into my co-author on trade in

the front row. i think one of the key points of both the report as well as the answer to your question is that china has reemerged as one of the worlds made her economies and with that has come a major position in trade, finance and the best event and one aspect of that traditionally has been increasing use of the currency. and so, as they look at china's increasing economic role in the world, it is also important to think about the increasing role of the currency and in particular as the relationship between the major currencies like the dollar, the euro, and assorted challenges for global market of the relationships between those currencies. >> let me ask about the amount of use the r&b is now getting in international transactions.

it is in fact very small. one of the key barriers to an increase. >> there are two sides of that. initially we talked certainly if we look at asian currencies, the r&b in the context of agent transactions has become really substantial. internationally, it seems to float in terms of trade payments somewhere between just below or sometimes just of the two the canadian dollars. they compared that used to the size of china's trade flows. over the past year and a half, there's been a lot of attention on the process, but we've also had a lot of volatility in chinese domestic market. in particular in the stock market in just over a year ago

in the context of the currency markets. i think the context of some of those domestic volatility is has slowed progress down in the context of international. >> the moment that we are in history is that why is china pursuing this internationalization process and why is it a propitious moment for china to be attempting to internationalize? >> this is not the first time china wanted to start a player role in the economy. china in 2001 was basically wanted for china to be more engaged in trade and also international finance. in the previous regime, in 2006, they had a big meeting about in a lot of foreign leaders to launch this thing called the

global policies. you see substantially increasing other emerging markets. this is globalization this time in terms of trade and investment of growth, china has been sort of pushing the weekend because the opportunity in the domestic economy have gone so how many high-speed railways you can build connecting the cities. something that i've been doing research on regarding china's economic growth is that our they wanted to use them external pressure to facilitate and speed up reforms. so it is a good example. in fact, the prime minister is not so much about globalization. it is more about privatization

because to privatize some of days so that you provide some sort of external pressure to basically privatize a lot of his terms. i see similarities. on the one hand china wanted to be more powerful in terms of, you know, other countries to use the currency. but on the other hand they also need external pressure to involve the financial banking sectors. >> we honestly thought particularly the volatility in financial markets in china and also delete confusion i think in a lot of other global capitals about what china's foreign exchange strategy was. how did the chinese produce that confusion and uncertainty in how successful do you think they are being?

>> so i got my training in the u.s. i am a big believer in decentralized economy, free market. once in a while it could be root for the government to intervene and review the stock market. so the way that government has been doing is biologically the haunting. investors from abroad and also -- as a result the kind of housing bubble has been in china almost like a consequence of the healthy regulation of the financial market. so that has been a backward development in terms of additional reforms in the financial sector. hopefully as an fdr currency of the imf, there'll be some legitimacy pressures have been

on the one hand their hands are tied and they cannot just intervene anytime they want. they would provide more confidence and credibility about the financial system. >> let me turn to you. first of all could you pick up on that last point, how successful do you think the calming measures have been in terms of the foreign exchange markets more recently after all we saw earlier this year. >> obviously a year to 18 months ago we were in a rather difficult situation. we had a lot of stresses in the global market from anticipation of the fed tightening of strengthening the dollar. and so a number of emerging markets and at the same time you had some concerns about that project three and some are calling for a hard landing. of course china in a capitalist

account to allow for an investment to move overseas. of course with the cnh or other centers as well as hong kong for foreign investors to speculate on their trade to the freely political currency offshore. these errors were contributing to pressure, downward pressure on the currency. what we saw before especially in the global financial crisis when obviously we had less liberalization at that time, but we saw them the ability in china that they tend to have a batten down hatches approach to situations such as this. what is important is to just focus on the long-term rehear of the reform and

internationalization process. we believe that will definitely continue. we think what we saw 18 months ago was more a blip in terms of a calm things down, try to remove the dislocation we saw before the onshore currency in the upshur currency and we are actually going to see an acceleration of reform that makes those two markets trade much more in line with each other. >> let me ask about the implications for corporate specifically in the process. does the report referred to the idea that they could be reduced and what kind of benefit you currently see for your client in terms of this process? >> that's a great question. we have seen over the last few years the ability for corporate obviously to transact and they would tend to make payments, but there is significant constraints

and not process. you don't have control of the currency conversion. you are essentially leaving it to the supplier for the payer to manage those foreign exchange risk and can be inflated to take in account to the exchange risk. they are really now finding out, for instance, serving manufactured goods from china for invoicing and r&b accounts in the offshore market, which very easily is funded and making payments that have no documentation or regulatory requirements attached to them. they are finding up to 4% savings on what they were paying previously. it is an important process they need to look at and understand if you're going to do business with chinese companies, you

really need to look hard at using the remedy of the trade currency. >> douglas, what did your research show but also the barriers of the moment. >> i have highlighted a couple of them, but from the benefit standpoint, one is as we see ever-increasing trade and investment flows, using the domestic currency of provide an alternative and accessing the domestic chinese market. one of the things we pick up on the part of much of the trade and investment into latin america have largely focused on commodities resources. this is something in the context of thinking about the region. we think that there is a need for rebalancing that direction in use of the rav to target the very large and rapidly growing chinese market is one of the important options.

>> talk a little bit about the same point by targeting the chinese market, what are the barriers that the moment? >> i think more investors and banks, you know, they have control for the foreign ambassadors in the chinese ambassador's weird even though they could be substantially reduced being included and the ability to reform the amount of money that can be channeled out then in are still heavily regulated. five years ago it was probably worried about driving up the stock market in the housing market. these days they were more for capital outflows.

the investors that still invest in china on the so-called qualified prosecution of the investors, there are about 300 of them at the same time the lasting investors. so without substantial removal of the capital control i don't think at this moment we can say much about how much it could eat a major global currency yet. the chinese government was very committed. in fact two years ago, the premier said by 2020 the chinese government is going to have full ability. now it is almost the end of 2016. of course we are talking about china but it's hard to imagine them for years that we will see fully convertible mostly because of the candidate control and partly because the financial

market still needs a lot of reforms for that to happen. >> all go back to you in a second. >> yeah, over the last few years, one thing we have noticed and if i may pat ourselves on the back a little bit is that we have tended in our research talk about it being faster than most expect from 2010-2013 and that was definitely true. i think we've been through a rocky patch in the potential for the chinese economy and what is happening with global markets. we have seen the u.s. election coming. you know, there were uncertainties and i think that the authorities in china will remain very cognizant of that. but assuming that particularly

on the domestic chinas economy remained steady and stable. we don't see any capital outflow pressure is and i think what you could see as an acceleration of the reform process. whether we have the capital account by 2020 remains to be seen, but i wouldn't doubt it too hard. i think already we are beginning to see major central banks around the world including latin america buying for the reserve assets. the number relative to their total reserve is very small but that's definitely the trend we are seeing i think we'll see that continue. >> actually just a follow-up. it is sort of a non-going joke that for the past 20 years within five years away from convertibility in china. i think over the past couple of years we thought that maybe five years might actually have been.

but it still seems like it's five years away and could continue to be five years away for some years to come. one question on your point is use a central bank reserve since the opening of the interbank bond market, are you seeing more basically direct access? >> we are seeing significant inflows over the last six for the launch of this year to the inflows were they produce pretty negligible and outflows prior to march. over the last six months we have seen a pickup in inflows from both institutional investors and also central banks as well. >> one of the reasons why central banks are going to be increasing the reserves is that

given the trade flows and if we see an increasing denomination of this trade flows and r&b, there is a necessity for central banks to manage to and as a result central banks around the world have a need to access assets particularly in the domestic bond market had you agree with us? >> i think in the long run they will be increasing the research related investment going into china. but there have to be prerequisites and the fact that of course we don't expect four or five years, but increasing the ability would give foreign investors some confidence that they can in that situation -- in

the trade flows and how much of it is going to be a remedy. i remain very optimistic that more of that is going to be involved. because i do some research on china, africa revisions. i shouldn't use the word trick, but one strategy they have been doing is investing a lot in natural resources in africa and brevity and returned those african nations will have to buy chinese goods. so that way is a very effective way of sort of the remedy to be a global currency. on the trade side and very optimistic. which is a little bit more research because they think there is still quite a bit of legal reforms and financial market reforms that need to be done before that can happen in. morgan stanley i think has a very optimistic estimate that i

think they have a tenure in mind that there will be 1 trillion floating into china as a result of currency purposes. >> them a look at the big picture an announcement to the dilemma reached over. douglas, what are the practical implications for this inclusion and how important is it merely a symbolic thing or do you think it is a major thing for the future? >> i actually go back to earlier points that i think when they look at the fdr inclusion there are really two principal reasons why it is. the first has to do with the process of domestic financial restructuring. in other words, much of the strategy of the chinese leadership saw fdr inclusion

much of the same way as wto joining. in other words, this is a way to lock in the reform process and i think internationally as well once i became understood was one way to lock in the process of domestic financial reform. that has tremendous importance. the other aspect is largely political. it is something that is symbolic and important from the standpoint as trade flows increase, the re-denomination of central bank assets. the spr inclusion makes it a lawyer. from the standpoint of what this cause a germanic increase in transactions i think the answer is no. it is a much sort of longer-term restructuring and political recognition process. >> keeping from 70,000 feet,

could we talk about the implications for the u.s. as the prime currency was older but prime currency in the world. what. could you see that being challenged by china? are we talking many, many decades? is this a threat or an opportunity for the u.s.? >> i certainly don't think it's a threat. in terms of currency flows, did the ins doesn't try any of the three years. you know, the u.s. dollar is still by far the dominant currency that over 90% of foreign exchange transactions the dollar is one side of the currency transactions, so that is not going to change in a very small portion of that. what is interesting in that survey and as long as i've been in the market and watching you seen at the audience going up every three years and this is a first-year total at the volume

file versus 2013. what is interesting is within the ethics volumes are now up to the aid largest currency, still relatively small number compared to the total dollar transactions. but interestingly in a three-year span when the volumes have fallen in, the volumes have actually risen. that is reflective of what is happening and what will continue to happen. commodities i don't mean to change anytime soon. latin american commodity exporters may struggle to try to shift or the chinese will struggle to shift that pricing so i don't think that is going to change. but i do think it is significant for latin american exporters to both very seriously at being paid and r&b as opposed to those

exports to china. in particular the chinese company is now are actually running into some roadblocks and hurdles themselves domestically to pay for their imports in u.s. dollars is becoming increasingly easier for them to do the ends so i think they will be quite open to latin american exporters to china approaching them to be paid in r. m. b. it will be more convenient to parties and potentially see cost savings for the latin american count that is exporting to china. >> on the same topic, what are the implications for the dollar? >> the way that i would analyze this is a nomination encouraged into both financial flows and as

i said i think there would be an increase in the use of remedy, particularly within asia. trade is such a complicated subject these days because of the development of global value chains in increasing regionalization. there could be a network of multiplying effect which would put the remedy to be more useful in international trade. in terms of the denomination for financial transactions, i think remedy is still sort of faraway from the u.s. dollar as being the major safety investment aspect. ..

the major safety. >> douglas, i'm going to ask you to turn to the question at and we will open it up to questions. if you have any questions be raised her hand up. >> i think i would knew was that a little bit. what we are very likely to see in the near future, the r&b will emerge around the third slot, in the context of chinese economic size and relationship you can expect it will probably eclipse million in the near future. i don't really see. >> thait almost did it this yea. this is something that is near-term. i think what we are looking at is three major currencies going forward. i don't see any likelihood in the medium term of the eclipse and dollar but something in

parallel to the year makes a great deal of sense. finally, from the standpoint of the financial site as opposed to the trade side. we've now seen china emerge as a net credit as one of the world's major foreign investors. and as an increasing push for that investment and credit to be provided in renminbi in international market. if we look at historical processes of other creditor nations emerging throughout history, we will see an increase in the use of the currency for financial transactions as a brother of that. >> right there questions from the audience. please raise your hand if you say we are from when you ask your question. this gentlemen here, first. in please wait for the microphone. >> my name is walter. i've been in china.

i will ask you a simple question actually. because there is a trade imbalance between all of the countries, the twin china and the rest of the world. eventually china's people will demand better standard of living. try to balance the collapse because china will demand better life, better standard of living, et cetera, et cetera. so from other countries, they will say no more chinese product will be entering into our countries. their currency eventually will go down with the same situation because there's no way they can sustain. because of all the country close the markets and the imbalance is so great, what would be the future of china's currency this happened? >> so if i understand you correctly, so you are concerned about the fact that foreign

consumers may not want as much chinese goods to be exported to those countries so, therefore, the demand will be reduced your is that the conjecture? >> so i'm a trade economist believe in comparative advantage. i still think that china still has lots to provide international trade. labor cost of increasing quite a lot but compared to visit mexico and can use they are still much lower. what m23 more about is basically the increasing protectionism we see in the u.s. and around the world. so that they push chinese growth back i want or two percentage points, if i have to put a number on. you are absolutely right that the renminbi has been weakening. if you look at the exchange rates, i think the renminbi has been depreciating since november last year, but i don't think that sort of sudden increase in trade protection will lead to a

collapse of the renminbi just because they're still a lot investment and a lot of demand for chinese goods in the absence of protection. >> why don't you invest inside of china? [inaudible] >> the people will demand better standard of living. what's going to happen in china when they say, hey, we cannot live on that? >> let me give this one to douglas. >> we are already seeing this as an important trend. wage levels are increasing, consumerism and china is increasing dramatically in fact that's probably the chinese government's biggest objective right now is restructuring the economy to push it up the value scale, up the innovation skill. and very much

internationalization is, in fact, part of that process to drive the development of the chinese economy. so, in fact, what you're saying is already happening very dramatically. i see it were a live in southern china, that wage levels have increased dramatically in the source of low-cost manufacturing that used to dominate , in southern china have been pushed out to the and, to bangladesh, to increasingly what you see is higher value added electronics, and, in fact, quite innovative developments. taking over where you see the shoe and textile factories. >> another question, please. please wait for the microphone. towards the front. a little bit further. >> emily from universal hong kong.

mike lynch is partly related to previous question on the domestic chinese reforms, and as was also mentioned about that this renminbi internationalization would have deep publications with a domestic locking in of the domestic chinese reforms. i wonder how much of it its domestic market reforms are going to cost chinese in terms of, example, unemployment or we're talking about rising wages or increased cost of living and other things. so with these reforms, market reforms, we be worth the cost in terms of unemployment, social unrest, all other. >> do you want to take that one? >> yeah. i think the quick answer is that the sort of you in china at the moment is that the risk of not doing anything, of staying with

the old export oriented low-wage manufacturing driven model is at the extent of its possibilities. and as the labor force is are already shrinking, that, in fact, that previous model is no longer sustainable. so the only option to avoid much more severe problems is, in fact, a process of restructuring the economy to avoid a middle income trap. and financial reforms are very important process of making that happen. so it's very much a balancing act between the costs and challenges of the restructuring versus the costs and challenges of the fact that the old economic model is no longer sustainable. so trying to balance the two.

>> how bumpy is this proving to be? >> i think remarkably smooth so far. the governments switch to focusing on domestic consumption of years ago, and as part of that reform process was trying to do is encourage savings from the domestic, the chinese population, typically the chinese a very good savers. they save primarily for retirement and their children's education. and health benefits. and so the government has been doing is they've been building new public schools and hospitals to try to encourage the savings and more consumption. in general has become a relatively successful policy to date. i think this trend will continue. i think the code is evolving and

certainly the way from the export led economy. i think as long as you don't see significant pressures in certain parts of the economy, especially the property sector, that i think we can be relatively sanguine about the outlook. >> one more question, towards the back, please. right there. >> just a quick question. john maier from the be -- peterson institute. you mentioned that will spark reforms that will close the gap between onshore and offshore. you think that's because of move towards more convertibility or is there another reason? >> the difference between onshore and offshore market was a couple of points to those are unfamiliar. if you imagine the onshore market is basically domestically in china, we talk about offshore market as all of those other

centered where you can trade the renminbi on a free basis. like trading the euro. and they said it clearinghouse is in 16 cities around the world now. the first one was in hong kong, and that's still where the most liquidity exists. you wouldn't imagine a pool of liquidity of renminbi and offshore market a much bigger pool of liquid and onshore market. what we have had certain periods of stress is the liquidity in the offshore market becomes smaller, and that leads to pressures on the currency and the money market, and we see money market rates went up. we see the currency weakening vital to the -- relative to the onshore market. this has been a concern. since 2010 when we begin to see the advent of the offshore market, there's been a couple of periods we've seen this location between the rates, between

onshore and offshore market. in some cases the renminbi was trading more strongly. there was extreme demand for renminbi assets but more recently the last 12 to making much of seen it go the other way with some stresses. i think the reforms are really going to focus on moving liquidity between those two centers, and the ability for banks that have presences in both markets to pool that liquidity. i think that would coach the processes of unifying the two rates on a longer-term basis. obviously, if we get to a period where there's full capital account convertibility then there will be no issue and any differences between those markets will disappear. >> as i said at the start, it's a huge and historic moment, historic week in terms of currency policies and economic causes run the world. a lot of this will be debated over the next few days because the imf and world bank are having their annual meetings and

it is germane to this discussion. as i think you will find, extremely complex process and has a very for long way to go. so for the time being please join me in thanking the panelists. [applause] >> got the next panel coming up. great. thank you very much. that morning. i'm the director of the latin america economic growth initiative at the latin america discussion. sam, thank you for a great discussion. i think the only problem with this first thing is you did such a good job knowledg now just ser for second bill. so now we have a part of it. before so i would like to congratulate douglas in the crucial on an excellent report on the topic i think frankly may

be overlooked by some as just a technical development in the world. they really has potential to reshape how business is done across emerging markets including latin america and that's really no small statement but, frankly, it's true. there may be reserve asset which is not to be overlooked as the first panel said. asked his potential to bring change is not just a chinese market and the case of reforms but global applications. we spent the last half-hou halfk at the ins and outs of china's currency policy but we are the latin america sense of an experiment is going to look at what this means for latin america. we have a dream team of speakers, my dream team us because a lease, to look at that. i'm going to sit down. the first speaker, you had their full bios but i will briefly introduce them. to my left is barbara, a senior investment policy officer in the trade and global competitors global practice at the world

bank. in addition she spent eight years at the peterson institute. you publish on a number of topics but also chinese foreign direct investment in latin america. so this is a topic that's very familiar to barbara. next to barbara is a person who is no stranger to washington, somebody who commands respect around this town and globally and that's ambassador luiz. practice a senior fellow now for the adrienne archie latin america center. the ambassador was previously a ruse ambassador to washington up until just a few months ago and among his many other responsibilities in his life he also served as minister of economy and finance under the administration of president jamal a. now that you're out of, we can ask you those difficult questions. and now claudia, is the

washington correspondent for newspaper for to me that those who isn't it's one of brazil's leading and most of financial newspapers. among the many a fun, she spent six years living in beijing but that's not her only claim to fame when it comes to china. you have written down two books on china among, and i don't know how you find the free time being the correspondent submitting daily stories, but living in china and writing about china. i've asked the speakers, i've encouraged the speakers to disagree with each other. because that's what makes a panel on. let's see if you all follow through on that. what we're going to do in the next half-hour is we're going to look at the general picture and then we look at risks, investment potential and, of course, although this is about china latin america we ordered washington so we look at the u.s. complications of renminbi

internationalization as it pertains to latin america. let's get started with you, barbara. you've got a lot of excellent work on chinese, fbi latin america. d.c. renminbi internationalization reshaping investment picture across the region in the short to medium term, or is this how this is a tough question that our implications really so much unknown that it will not be clear for years to come what the real impact is? >> thanks for such a mayor and specific question, jason. you've given me, we really don't know. >> i'm not going to let you get away with that. >> i probably should stipulate that although on my bile you see them at the world bank, my views do not represent those of the world bank come any member countries, any of my dear colleagues of the brothers were persisted. i'm probably hear more with my georgetown professor had. >> one of her many claims to fame.

>> i think it's an interesting question. as you know obviously, and the report mentions this, congratulations on an excellent report. chinese interactions in latin america have really been sort of leading up to this. in terms of renminbi internationalization you already have three countries that have swap arrangements with china and so there has been some activity in local currencies spent can explaicanyou explain what a swap agreement as quickly? >> a swap agreement and i think the audience probably knows, means that commercial transactions can be paid in the local currency. so if brazil exports goods to china, those goods to be paid for in renminbi, and vice versa. that actually brings up an interesting point that douglas made on the previous panel, which was the hope that this would lead to some rebalancing of economic relationship between

china and latin america. as mentioned many times, there's a massive trade imbalance between china and just about all of china's trading partner. and latin america that is a big deal. .net imports much of chinese goods but hasn't been able to break into the chinese market in terms of exports or in terms of investment. dr. batten investment in a little bit. if the internationalization of the currency is the ability to use the renminbi can expand, that would be great. and if latin american companies can train greater access to the chinese market, then this would help latin america break into a dynamic market. that said, china has been undertaking some reforms of its foreign direct investment regime, but there are still tremendous regulatory administrative and legal barriers in addition to reserve sectors.

i do hope that this is a signal that china is undertaking with economic reform and that those can be a benefit to latin american companies. >> this has been something allowed american companies has was struggled with. how do you break into the potential of the chinese market. ambassador, provide a lot of opportunities are latin american countries, investment in china to attracting new investment from chinese companies coming against the backdrop of a boom in chinese investment in the region. i want to take you back two days as finance minister, don't want to bring up any bad memories, want to take you -- what steps should finance ministries take to seize the opportunities but also how do you also from the

finance minister perspective mitigate some of those risks? >> thank you, jason. but he also congratulate the office for a very insightful report. actually when we talk about latin america here, i want to be clear. because he we have to do the distinction. one thing is a reality of cash starved countries needed to build the reserves but i will mention -- i won't mention the country but you'll know that went to a swap agreement, and the other thing is of a very sophisticated country that would like to give options to investors and just having a qualified investor scheme, namely -- so there's different motivations for countries. i think the opportunities trade wise, i think commodities will still remains a driving factor for many south american countries in spite of what's

being told. and actually i think for the non-commodity which would perhaps fit better in terms of renminbi denomination, i think they're still a lot of same line as barbara mentioned, a lot of restrictions to enter the chinese market. one talks about paris. one looks, for instance, the subsidies and the vat. the chinese charge for the imports that come from different agriculture products. they're huge, over 50%. so it is very difficult to access the chinese market for nonstandard commodity products come from anywhere in the world, talking about latin america. i would be less bullish entrance of this huge opportunity there is. i see it more as an opportunity insurance of logging in reforms come in terms of trying to liberalize its capital account,

deepen its financial market. i see that as the main, you know, objective of this process of renminbi conclusion. i wouldn't really be too optimistic in terms of a new way for trade to be finance. in central finance, there also needs to be an adjustment period in my own country, the chinese were very aggressive in terms of opening up, opening up one branch of the chinese legislation has constraints towards lengthy companies. and given for tax purposes, for baking purposes. if you are linked to a home

office, a home firm, then there are restrictions. and given that china, most things are by the government, that implied we had to change our banking system, our tax code to be able to accommodate. there are some restrictions in that regard. in terms of risks, i think the document does a good job in terms of the main objective, taking away the currency risks. we are a region primary that is seeking towards reducing its mismatches and currency. we just did for instant an operation in the market to be able to increase the local currency denomination of its debt. and i think firms on or beside are trying to minimize and try to hedge any potential currency mismatch as they may have.

>> even though there's reduction in transaction cost, because of the renminbi, i think it was done in the first bill who is more bullish, you see because of chinese restrictions that potential for latin american companies to move into that market speak with i see this as a long term process the it's country specific. i would not go all latin american countries in the same bag. >> miguel mentioned that he did want to mention any names of any countries, but he mentioned about china being, becoming sort of a lender of last resort in the last decade for certain countries in the region. i one in the countries. one of them is venezuela and the other one is argentina. clarify this, not under the current argentine government. under the previous argentine government. what the hell to do was help prolong unsustainable financial

conditions in those countries. so what is it in latin america's and china's interest to ensure that its loans and investments are being used, and begin for sound, technical and economic -- isolate america but talking about specific countries. >> the main obvious reason is to try to guarantee that the resources are used in the most efficient way possible. and then using the projects that make sense from an economic point of view. and doesn't perpetuate development model that is unsustainable. i think that is clear in the case of venezuela. china gave 60 billion u.s. dollars in loans to venezuela, and there is an indication that the oil production in venezuela is more efficient today than it was 10 years ago as a country. there is a reduction in the

economic situation in the country, is unprecedented. so from the chinese side i think there is this up not repaying the loan and i think one could also agree that there is a risk of political backlash to the situation we have a change in government, after the associated so strongly with the previous government. but i think if we look at the example of argentina, i think the expectation might be wrong. not to assume his office last year, and initially there was suspicion in the new government, that china was increasing amount of with in argentina under the new government.

.. overcomes any political backlash. >> of course, from china's perspective, they want to -- the chinese want to invest in policy in which investment is going to be able to pay back? >> yes. >> i think for sure. i think from what i hear and talk with people have seen experience as well of kind of had learning effect from the chinese side to be more cautious in dare decisions to lend money

and to be -- to be more concerned with the economic and returns of this investments in the long run. >> that's great, miguel, i want to turn back to you. there's obviously cautionary winds against internationalization and in this report which should be in everyone's chair, fantastic report although i'm a little bit biased. in this report we know the duo dynamic that increased investment would be a wind for countries but also cautionary note of how an increase could lead to greater bears of overdependence on chinese investment, chinese trade. what steps should be taken to ensure the increase or the potential increase use, brings

investment to necessary sectors in latin america doesn't result in overdependence on china oh is -- or is that too farfetched? >> i think that's too farfetched. our dominant investors are countries, the european, the u.s. and i don't think you can extrapolate. i would say that could play more towards the africa-chinese relationship than the latin america, you know, relationship with china. and just to give you an example and beyond commoditieses and actually we were just discussing can claudia before here, the first official visit to perú's new president was to china and to actually signal his intention to deepen the links and attract investment, not to, you know, ask for loans which is a

different important point made. but we were talking about this deal that we are drawing brazil and perú towards china. this was actually -- ha huge project of 60 billion was reduced to a commuter train outside of lima as a priority. so i think this, you know, overdependence theory doesn't really apply, we still do have huge necessities of investment of fdi which is receding in many countries and obviously we are open to receive investment but i don't see any particular fear. i also see a change in the nature of investment even sectors. back in the case of perú, 20 years we privatize the public, firm of ireland and it was

actually really bad experience, lack of a compliance with environmental labor standards. that was 25 years ago. nowadays we have, you know, huge chinese companies coming in that meet high standards, they actually stock in hong kong and london market, a couple of markets, so very sophisticated run under high standards and been a change in also the composition and the type of investors we are seeing from china coming into the region. >> barbara, on that point, do you see as miguel mentions, there's been a change in the composition of investors or sophisticated investors or sophisticated projects, but, you know, talking about the internationalization that can open the latin america market to chinese companies that don't necessarily have access to international credit and dollars to invest.

these were constrained by always building and have access to dollar credit. how can latin american companies come from new crop of chinese companies that don't have global experience. we talked a little bit on the report but maybe the perspective on this. >> two things, it's change to go a certain extent. there's certainly been a learning curve and both sides really gone through an evolution in terms of a country like perú setting out standards for all investors including the chinese investors and china through changes in its policy and also just learning the peruvian environment where for chinese companies dealing with civil society was a new experience and when we did our reports, some of

our interviews really pointed to the difficulties in learning the culture of the country. china has been invested in perú for decades. has gone through very difficult and very positive periods in perú, and i think that has contributed to increased sophistication and sophistication of investments in perú and some of that change and you see that happening in other countries and perú. china invests in natural resources and infrastructure and so china is a natural research seeking investor. if the internationalization of can somehow move china into an efficiency-seeking investor and help latin american that would be tremendous help to the countries and i suggest that another part of research program, the pacific are thinking of aligning policies in order to be able to do that.

the second part should we worry should latin mesh -- american countries worry about standards and without u.s. dollars, well, if a chinese company comes to like perú, it's going to have to meet the standards of the peruvian environment. it's going to have to meet labor standards and environmental standards and here i think there is a burn on latin american policy makers to think what risks might be associated with investments from companies with which they may not be as familiar. so really make some, you know, resource allotment so that those standards can be enforced particularly at the local level where you sometimes don't have great budget for evaluation. in terms of the currency issue or the capital issue, i would

just say that companies that aren't prepared and aren't well capitalized and don't have proper business plans aren't probably going to do well in the market. >> yeah. >> well, looking, claudia, at edward chinese investment, one deal on the table chinese financing with potential 10 billion-dollar loan from chinese banks. how significant -- let's look at this deal and the brazilian country and brazil is important, of course, because of the huge increase investment and trade between brazil and china in the last few years but how would this be with overall state of chinese and investment in brazil and along the lines of our topic today, does it make more deals like this likely going forward? >> well, the largest brazilian company, it's one of the company

who is the largest corporate in the world. $125billion. last year its investment grade which made it more difficult, and the chinese has been one of the main sources off of finance for petro, this deal has been negotiated since the begins of this year. there was an expectation that it would be announced during the visit the president but the negotiations have not been concluded but it will happen sometime soon. so i think it shows the importance of china as a source of finance to brazil and to brazilian companies and show the

deepening of the finance links between the countries and i think one of the possibilities that might open -- [inaudible] >> provide reforms that are needed to internationalization are implemented by the chinese government is probably the possibility of issuing bonds in the chinese markets and has more access inside china. >> president was recently in brazil, actually the first trip after confirmed -- >> yes, yes. >> sorry. >> foreign trip after confirmed as president. he used that as an opportunity to try to attract more chinese investment into infrastructure projects in brazil. how successful was that? >> yeah, it was a bit by chance that his first international

visit was to china. it was because of the timing of the impeachment process and the impeachment of former president was concluded in early afternoon of august 31st, he was sworn as president in a couple of hours, he was in the plane in china. and there was so big uncertainty of who will represent brazil in the meeting that the list of dignitaries had list of all representatives of all countries and in the case of brazil it was the leader of brazil because nobody knew if velma if the impeachment did not occur. president had a meeting with president xi jinpeng.

he took part of a seminar to chinese investments to present opportunities of investments in a huge infrastructure problem that the government launches earlier this year. it's projects that in total a month of $100 billion and there were 250 representatives of chinese companies and i think there was a great deal of interest specially in projects related to transport and logistics that could make it more efficient to export products from the region to china. and i think the reasoning specially since last year in invest -- chinese investments in brazil, i think, it is factors, the need of chinese companies,

the valuation that made it cheaper to invest in brazil and also something that we might see more in the future, the huge investigation of corruption scandal in brazil that affected many of the largest -- large brazilian companies that used to take part only for structure projects. >> that's great. i want to -- one last round of questioning, just quickly on the u.s. implications. we are obviously here in washington so we will be remiss if we can't talk about the u.s. implications and in the last few minutes to open up to questions from the audience. start thinking about those questions. i know there's one in the first row, if there's still that question, we can take that first. but u.s. implications. miguel, you were -- you served most recently diplomatic embassador to the united states

and i think we've talked about in this panel that the potential implications that international agencies have for bringing in more investment into latin america, i think the panel seems to conclude that there's probably less potential that this would bring for latin america to invest into china but chinese investment into the region. how do you see as having political or economic ramifications in the u.s. relationship with those countries in the region with which there will be even greater commerce and investment with china as a result? >> actually i think more important is the lack of approval of ttp. and actually now that apec is also being shared by perú, there's a tension between the u.s. and the chinese in terms of

actually pursuing a free-trade agreement where china is part of it and that's the blueprint that's being discussed in lima at the end of -- in november when we have -- summit of leaders, and what will happen if the tpp will be postponed, who knows when? i think that's more of an importance in terms of the impact on -- on latin america, china, plus relationship. i see real tensions. i see there a -- a concern from the u.s. administration of giving away space for chinese involvement. obviously would be a vehicle to accelerate the flows and to --

another way to join both regions, but i suspect that actually now the focus would be what happens with trade agreements. and that's actually something that we are more concerned as a former embassador. >> i think you always carry the title, though. barbara, do you agree with miguel? and also maybe this can be an opportunity of not necessarily of u.s.-china competition, but does this present an opportunity of working together, you know, kind of greater good which is the economic developments of -- of latin america and rising up the good of the region as a whole? >> sorry. >> no, go ahead. >> i can't disagree with miguel even though i'm supposed to. [laughter] >> i'm trying to get somebody to disagree. >> i like your scenario and sounds really nice, the u.s. and

china working for the greater of latin america. ly disagree -- i will disagree with you. >> perfect. [laughter] >> first we need to stop talking about building walls and also, you know, making statements about trade wars with china is not helpful for the greater good of the latin america region either. peterson institute has done work on what that might mean for the u.s. economy and the latin america economy, that would be a disaster. u.s. and china being two major investment partners. if we want to constructively engage with china, yes, that would be wonderful and maybe apec is one forum through which it is being done through a certain extent and that would be used as spring board for that. i think the united states has an opportunity to show latin america that it's concerned, that it's committed to the

region with a long latin america policy that does not include trading investment variables. >> time for questions, we are going to go back to jerry's question. >> it's a different question. >> for a different panel it's a different question. >> i just spent two weeks in china recently and one thing that i found out is that odi in 2016 is going to be the first higher than the fdi. china is going out to invest. having said that, the investment in china out of the financial like chinese bank in brazil, we didn't see too many frojts coming from the infrastructure of the real project that we can touch. i mean, in the biggest one was probably bahamar in bahamas. $3million went down.

i don't see many more investments going to méxico because it's kind of coke and pepsi. so where do you see real projects going? this is a question that they ask me so i'm asking you, going into latin america specially announcement of $250 billion going to latin america in the next five years. >> the structure would be the secretary -- we still have huge gaps to fill. each country has its own framework but we follow private -- public-private partnerships and chinese have been interested in many of the big projects, bidding for subway in lima or other countries but there's also pragmatic view, huge train, 60 billion joining brazil and

perú, now it's a commuter train in lima. there's also some realism into many projects, but i would say infrastructure, energy is still a very, very important sector towards the future. >> i think that shows how difficult infrastructure projects are. i think everybody was expecting with this new infrastructure things would go much more quickly and in reality expectations are being ratcheted down and hopefully will prevail and availability of funds will stimulate some countries to make things a little bit easier. so there's still a pretty good potential. i think brazil being a big potential market, but this last year hasn't been that easy for brazil and for big infrastructure projects in brazil either.

so i would say with time take a medium to longer-term view rather than short-term which everybody was hoping for. i think that is an area in which will can be, not to be negative on u.s.-china cooperation but where u.s. and china could improve welfare. >> in the case of brazil it's also infrastructure and i think there is an effort with this government to review the regulatory in which environment -- in which this project are done. there is decisions also to do public-partner, public-private partnerships and i think one area that we will probably be also attractive is oil. there's loyalty in the rules to expiration of the reserves and

will eliminate necessity of petro gas and 40% in each project which will make it more attract i have to foreign countries. >> a huge development is something that our center had a record on, the potential of brazil's oil and gas market and that's help to go propel it. we have time for one last question, we can maybe take you -- i saw your hand first. say your name and organization. >> benjamin, john hopkins university. i would be interested to know if you feel that the opposition in latin america can increase scrutiny or ease transactions, ease sort of -- looking at transactions between china and latin america. they are both very cash-based.

generally young entrepreneurs don't know what the r&b is. there will be possibilities of easying trade and transactions and i wonder whether this will enable greater scrutiny. we focus so much on the high-end big investments, but what are the possibilities of easing trade flow in latin america? >> thanks for that question. miguel, barbara? barbara. >> i think that's what jason is hoping in his question cautioning against these investments that may not be as transparent as we would like. i think that trends are going in that direction already, the internationalization won't be a silver bullet for that but will certainly help increase the -- increase visibility, i suspect that this panel is indication that people are paying for

attention to this and i suspect that that also depends on how much latin american companies and governments use and i suspect that people like yourself paying attention and writing papers and so will probably help increase the knowledge among young entrepreneurs that it may become an option and take advantage of that potentially. >> that's a great way to end the discussion, give homework to the audience and to help us on a follow-up. i would like to also thank along with peter here, we want to thank maria fernanda who is sitting in the back who has been working hard to make this event and report happen along with whole team at the art center. i would like to think adrienne our founder for being here today and also, of course, jerry and

the whole team, martin and jim and everyone over at hsbc, the whole initiative. it allows us to do what often times is not done whether in washington or beyond, which is looking at the details of the relationship with markets like latin america and realize there's no black and white answer. the answer always lies in the gray. thank you very much for our panelists and andrés suárez for the report. [applause] [inaudible conversations]

>> warning for hurricane matthew have extended up the east coast starting in florida and the governors of florida and south carolina have issued evacuations in some coastal areas, the national hurricane center says matthew is a dangerous and life-threatening category 3 storm that could increase to category 4 by thursday evening. at least 11 deaths in the caribbean have been blamed on that storm. here is what president obama had

to say about the situation today . >> as well as another of other agencies, army of engineers have briefed me for the possibility of some serious effects from hurricane matthew. matthew could soon affect areas across the southeast, so at my direction fema has been on the ground in florida, georgia, south carolina and north carolina working with state and local officials to prepare for the storm. we've already got response teams and supplies prepositioned and ready to help communities in the region. i want to emphasize to the public this is a serious storm. it has already hit haiti with devastating effect. it is now in the process of moving through bahamas. because it's not going to be

hitting enough land it is going to be building strength on its way to florida. we anticipate that by tomorrow morning it will already begin to have significant effect in florida and has potential for strengthened and move on the course during the course of the day. so i want to make sure that everybody is paying attention to your local officials. if there's an evacuation order in your community, you need to take it seriously. we anticipate that not only is there still a chance that the pour of the storm strikes florida and some of the states further north, but even if you don't get a full force of the hurricane, we are still going to be seeing tropical force winds and potential for storm surge

and all of that could have a devastating effect. so everybody needs to be paying attention and following the instructions of your local officials and if you get an evacuation order, just remember that you can always rebuild, repair property, you cannot restore a life if it is lost and we want to make sure that we minimize any possible loss of life or risk to people in these areas. i also want to make sure that we say thanks to the folks at the national weather service and the fema team for the outstanding work that they are doing here, craig in case folks aren't aware comes from florida, is familiar with the dangerous of hurricanes and it just so happens that he has family in areas that could be affected by this storm. so this is personal for him, you know that he's going to be working around the clock to make

sure that we are preventing any potential loss of life and trying to minimize as much as possible the impact of the storm but this is going to be a serious storm and we want everybody to take it seriously as well. even as we prepare for the hurricane here at home, i want us to keep in mind that haiti, one of the poorest countries in the world are already suffering from a range of previous disasters, has been hit really hard by this storm and we anticipate that they are going to need substantial help. there may be similar needs in places like the bahamas so i would ask that people who are willing to contribute and willing to help, to visit the center for international disaster information, the website is cidi.org. cidi.org. you can find out how you can

help make life a little bit easier for people who didn't have a lot to begin with and now are really getting hammered by this storm. and last point for everybody in the potential affected states, even as you are awaiting to get introductions from your local officials, now is the time for you to prepare in the event that you have to evacuate, even if you don't have to evacuate, there is not an evacuation order but still makes sense for you to figure out what kind of plan do you have, what kind of preparation and supplies do you have and if you need help trying to figure that out, go to ready.gov. that will give you really clear introductions on how you're securing property and keeping your family safe, which is obviously the priority for all of us. so this is something to take seriously.

we hope for the best, but we want to prepare for the worst. i would urge everybody in the affected states of florida, georgia, south carolina, north carolina to pay very close attention to your local officials and the broadcasts that are going to be coming through over the next several hours, all right. thank you very much, everybody. >> the miami harold is reporting long lines at gas stations and stores, marco rubio held conference, workers and employees need to leave early to put up shutters. he's going to change out of suit and spend the rest of the day putting up metal panel shutters to protect windows in his west miami home. away from the storm and on the campaign trail is senator tim kaine. he's in philadelphia where he is expected to explain the clinton campaign job's plan.

you'll be able to watch it on our companion network, c-span. >> if you missed the presidential debate go to c-span.org. once on special debate page, watch the entire debate choosing between split screen or camera options. use our video clipping tool to create clips of your favorite debate moments to share on social media, c-span.org on your desk top, phone or tablet for the vice presidential debate. [inaudible conversations] >> with the breakdown of negotiations between the u.s. and russia the brookings institution held a recent discussion examining the arms control between super powers. panelists former assistant secretary of state and steven piper. this is an hour and a half.

>> second panel, ladies and gentlemen. we had a very interesting and enlightening first panel. i'm angela, the director for european studies at georgetown university and senior resident of brookings institute. i'm very tempted before we get to the question about what happens since the collapse of the soviet union to make two brief remarks about 1986, one of them, maybe looking forward, on the question of why the soviet union collapsed, he gave a talk. what was your biggest mistake and he said i underestimated the nationality's problem. i want to come back what fiona

hill said at the end. inability to work out an agreement between the center and the different republics of the soviet union and that was related and that was the thing. and the other brief, before he met president reagan was i arrived in the soviet union in moscow three days before the accident, i had a fellowship for one month at the world economy and international relations and i had with me a 1-year-old son and that's relevant what i'm going to say. so i had been there two days. i'm listening to the bbc radio and then i realized that some catastrophe has happened in terms of a nuclear accident. and the next week a few days later i gave a talk at the institute and i was trying to be

forward leaning and the importance of improving u.s.-soviet relations and the person who hosted me, the chair of my panel then started attacking me for the quote, unquote the lies that the united states was selling. there had been in accident, no one had been killed. that was one version of it and by the way, after my talk i had people privately come up to me and say, you know, what's really going on. anyway, in the three subsequent weeks, complete turnaround denying that something had happened. admitted that something had happened unfortunately by then it was too late for some of the children, for instance, who had been playing socker on may the first in radioactive dust places in key of another places of ukraine. anyway, before i left the soviet union, on my last day, the very man that would attack me when i gave my talk came up to me and said, thank you very much for

being, terrible strategies happened and we have to work together, we have to cooperate to make sure that this doesn't happen again. this was a transformative moment and you hear things today about who is responsible for what in the world and the downing of the malaysian airlines sounds reminiscent of what it was in 1996 before. anyway, so i think the first point i wanted to take having listened to the fascinating panel is the beginning of a very important process and something like that, it's hard to imagine that something like that could happen today because it was so much based also on the personal relationship between these two leaders who despite all their differences got on rather well and we are at a point today where u.s.-russia relations have

worse since before govashov came to power. we see the relations between the two president, almost poisonous. the kremlin announced that russia with withdrawing from its agreement on the the disposal of weapons grade plutonium and the united states was, of course, blamed for that and putin, when he announced this said that the reason russia was doing it, i'm quoting now, the emergence of a threat of strategic stability and as a result of unfriendly actions of united states of america against russian federation. he's now tied, russia rejoining this plutonium agreement to

three conditions, one of them is that nato should withdraw forces which are in russia's neighborhood, secondly we have to end the sanctions that were imposed after russia annex crimea and launched a war and thirdly, congress has to aggregate the act which shows continuing lack of understanding in the kremlin about the separation of powers in the united states or how the system works. anyway, those are three conditions which mean -- i mean, they won't be met, obviously, so russia will withdraw from this agreement. so the purpose of our panel today is to ask why is it being so challenging since the soviet collapsed to reach and then maintain and increase arm's control agreements between the united states and you would have thought with the collapse of

communism, end of soviet union it would reach such agreements and as being pointed out, in every presidency since the collapse of the soviet union the presidents started out rather hopeful about arms control agreements and in the second terms if we are not talking about now the george h.w. bush administration but in the second term of clinton, george w. bush and obama. the agreements have stagnated, frozen and they haven't been able to proceed. and this is tie today a broader, -- tied to a broader scene. each american president has come into office or in george h.w. bush's case he was already in office seeking to improve relations with russia, trying to have a more productive relationship. all of these have ended in disappointments because obviously we have a very different understanding of what

a productive relationship with russia would look like. what has worked in the past 25 years has been issues where russia feels which we are treating it as an equal and it feels that its interests are respected and our interests and those of russia narrowly define b or coincided. one of those what happened in the fall of 2001, the cooperation with russia in the first phase of the war with afghanistan and russians were very helpful and cooperated with the u.s. because we had very much a common goal. there's more examples. u.s.-russian cooperation in disarming syria of its chemical weapons in 2013. the discussions we had to agreement on iran and the arm's control agreements because in arm's control in general, this is a field, be aware, the u.s. and russia deal with each other as equals, we are the two nuclear super powers and russia

usually feels that it is being respected as a world player because we come to the table as equal. so all more reason to question why it's been so difficult to complete and to sustain the arm's control agreements. now, we have two excellent speakers, we couldn't have any better speakers to discuss that with us today. i will be turning first to steve, he's a principal and former assistant secretary of state dealing with arm's control issues in the george w. bush administration and also worked on capitol hill, rich experience in dealing with issues and brookings' own steven, former embassador to ukraine having daiflt at various levels in the state department and national security council with arms control issues. he is, of course, a senior fellow at brookings and he's the director of the arms control and nonfrom life ration --

proliferation initiative and i'm sure he will have a great deal to say about this. i'm just going to say a few words about the background to when george w. bush came into the white house about what happened in the clinton administration in terms of arms control agreement and we can move onto see what happened since then. so when president bill clinton took office in january 1993, he inherited two nuclear arms control agreements from the george h.w. bush administration. stock one and stock two. we heard background in the previous panel. stock one reduced each side to no more than 6,000 strategic war heads on 1600 strategic nuclear delivery vehicles and stock two, which had been completed before the first president bush left office went further, reduced each side to more than -- to no

more than 3,000 to 3500 strategic war heads and also from the u.s. perspective, very importantly, it was supposed to ban all heavy icbm's and all icbm's with multiple war heads. now, start one's entry into force was held by an issue that we are reminded very much today again and that was the question of ukraine and readiness to give off nuclear weapons. of course, when the soviet union collapsed, ukraine was the third largest nuclear country in the world and the clinton administration and before george h.w. bush administration worked very hard on trying to ensure that russia would become the only nuclear successful state on the post soviet space and that involved ukraine being willing to transfer nuclear weapons to russia. anyway ui give great kudos to the clinton administration. both ukraine and russia were

reluctant for different reasons and they signed the agreement in 1994, but, of course, that was tied to the infamous by now budapest memorandum which gave assurances if it relinquished and, of course, included the russian federation. in 1996 the senate finally ratified the start two agreement but then there were problems with moscow. this is now a tale in the 1990's of the difficulties of implementing these agreements because of the deteriorating political relationship and particularly in the latter part of the 90's the russian military was not happy about giving on the multiple war head and heavy icbm's, and then, of course, you had the beginnings of the disagreements about russia about nato enlargement in

1990's and in 1999 with the nato actions against serbia with bombing, et cetera, and so delayed ratification of the agreement. this is where we come back to star wars and i know we are going to hear more about son of star wars, missile defense. then tied it to saying that the senate had to ratify the 1997 agreement on the abm system, the antiballistic missile systems. star two, then which had been rather signed into law by george h.w. bush, was pulled back by vladimir putin when the united states announced that it was unilateral withdrawing from the

abm treaty at the beginning of 2002. so by then, of course, you have missile defense issues which are now intruding on the arm's control agenda w. that brief background, i'm going to turn to you and we will look forward to your discussion of arms control in the george bush administration and whether you have views about why discussions on arms control did or didn't impact on the ability of the united states to cooperate with russia on other issues too? >> okay. well, thank you angela and thank you for inviting me. i want to throw an idea on the table before i get into my discussion of the bush administration. in 2009i wrote an op ed that was published in the wall street journal that gave it the title why democrats fail at arms control. that was my title and not mine. [laughter]

the issue that i looked at was the paradox that by reputations republicans are skeptical of arms control and democrats are deeply enthusiastic. yet, if you look at the history of bilateral strategic control between the united states and the soviet soviet union. republican presidents have a lot of accomplishments they can point to. when i read that article in 2009 it was the case that no democratic president had negotiated or had ever negotiated an brought into force a strategic arms control agreement that the soviet or russia. why is that? how can it be that the guy who is were skeptical seemed to have more successful at this then the guys enthusiastic? you can offer theories, one theories is democrats had bad luck, maybe with jimmy carter,

it's not his fault that soviets invaded afghanistan, maybe you can excuse inability but to bring ratification of start 2. but in my article i sort of put forward a different theory which was that, you know, it's kind of common sense among people, among all of us that in a negotiation and we negotiate in our personal lives all of the time, excessive enthusiasm is not conducive in getting the result that is you want in a negotiation. you're buying a car, you know u even if you find a car that you really want or i guess i should say if specially you find a car that you really want, i think you know the last thing you want to do is convey to the seller that you made up your mind, it's that car and no other because if you convey that, the seller becomes aware that your demand

curve for that car has become elastic. what happens? the price goes on, i'm not going to leave any money on the table. i have somebody who is really -- i'm going to get as much as this transaction as i can. that's just common sense in our business transactions. for some reason, i think some of our presidents, not just democrats, george h.w. bush was enthusiastic and ended up getting a bad deal too, but for some reason many of our presidents have fail today translate what is common sense in, you know, any sort of business transaction we might negotiate at a personal level. we don't understand that the same applies between nations and in negotiating with the russians, conveying excessive enthusiasm can actually backfire. that was my thesis in this piece that i wrote.

president obama did succeed in 2010 in negotiating his arms control treaty with russia, though i would argue that negotiation became prolonged again because of excessive enthusiasm on his side. but with that background, i want to turn to the bush administration which has been accused of many things but never been accused of excessive enthusiasm for arms control. [laughter] >> so what was the record of the bush administration? the administration came off as more or less committed to abolishing the abm treaty because it had been an obstacle and also given the security environment that existed at that point comoited to reductions in nuclear force levels, but not at all committed to the idea that this needed to be negotiated and agreed with united states and

russia. so first thing that the administration did was in december of 2001 it aggregated or provided notice of ago gas -- aggegation. every single issue of the control today had editorial about abm treaty was the corner stone of strategic stability and without the abm treaty, the entire architecture would collapse and the result would be new arms race between u.s. and russia. the theory was put to test. bush provided notice of termination. five months later he signed an arms control treaty with moscow providing for reductions -- i think the force level under the existing treaty was 6,000 war

heads, reduced to no more than 2200 under the moscow treaty or sometimes called the cert treaty. it was proven within five months because arms control had its -- was the first successful strategic arms control negotiation between the united states and russia in more than ten years that took place in the wake of aggregation of the treaty. also the background to moscow treaty is interesting because it was not your traditional arms control appreciation. bush administration did an internal review and determined nuclear force level that it thought was appropriate in security involvement and announced that the united states was going to reduce nuclear forces to this new level and the russians at that point basically

came knocking on the door and said, very we are happy that you're reducing nuclear forces, that you're doing that but we really need a treaty. and it's very important to lock in the reductions and make them mutual and true to its complete lack of enthusiasm for arms control the reaction of the bush administration, no, we don't need a treaty. it was not important to us. the russians -- it's really important to us, we really want this treaty and basically the bush administration said, if it's that important to you, i guess, we can sign a treaty. here is what it's going to have to say because we are not interested in years of negotiation and, you know, all the other issues. take it or leave it. we will sign this. you know, the arms control industry mocked the treaty, i think actually printed it on the front and back of the index card

to show how bare bones it was. it was a short treaty. this was a treaty you can print on an index card but it did require reductions by both sides to no more than 2200 operational deployed strategic weapons. so it was interesting that confronted with the administration that was basically indifferent to whether we got an arms control agreement or not, the russians were not the obstacle to the agreement, they were essentially insisting on agreement and the u.s. was in the position of saying, oh, okay. but it's going to be on the terms and the russians said, yes, to those terms. so it was actually the first success in arms control in more than ten years. and maybe even in the q&a we can talk about why the clinton administration -- it didn't necessarily want a very large u.s. nuclear force.

it was prepared to do reductions too but it had some problems getting agreement with russia on what it wanted to do. basically it felt completely around the axel on trying to preserve the treaty and the russians took advantage of that to any effort to negotiate arms control agreements during the clinton administration. it was by terminating that the ground was cleared that such bilateral arms control was possible. that's how we started in the bush administration. as you suggested, angela, things kind of went downhill specially toward the second term and i think there are a whole bunch of issues to work there. paul did a very interesting paper on where did things go wrong. i was actually aconon--

astonished. >> yeah. [laughter] >> how many people know what the memorandum is? >> it was an effort to resolve agreements. the russianss were deeply bittered by the way the bush administration handled that. supporting the georgian government. these are the traditional answers but much more complex than that because -- i think it became difficult to maybe taken that momentum and had a lot to do with president putin and his effort to return russia to something like the role that it

had played in the past. maybe i will stop there. >> okay. >> and you talk. >> thank you. steve, you want to take up the story? >> sure. we'll save memorandum for the q&a. if i think you look at how the arms control has played in the obama administration and in the last eight years, i guess there are three phases. the first was reset from 2009 to 2011 and it was pretty clear that when barack obama became president he wanted to do something big on nuclear weapons and we saw that in april of 2009 where he embraced the world without nuclear weapons and also be realistic this may not happen in our lifetime. we have to have a deterrent that's secure and safe and reliable. going back to the first panel, you know, obama and reagan were the ones that had a passionate belief about really doing something significant about getting rid of nuclear weapons.