washington, new york, china and various latin american countries. stay tuned for more programming on this hugely important set of issues. now i would also like to say a very warm welcome to the executive vice chair "the atlantic" council board, adrienne arsht in the audience today. adrienne, thank you. adrienne is in large part responsible for the vision of this organization and the work across a range of issues which have been so successful in recent years. she really is a remarkable driving force. and, adrienne, we thank you for so many good deeds that you do for this organization. today's discussion is on a topic which requires global attention beyond just the financial world. so i'm delighted to be joined by a distinguished panel of experts

to discuss the profound impact of the nationalization. and the impact it will have on emerging markets, particularly in latin america. our event comes at a critical moment as just on saturday it became the fifth global currency to be accepted as a official reserve asset by the international monetary fund. this is a telling moment in the country's emergence as a global economic powerhouse. for countries in latin america such as brazil and argentina, that already have substantial trade and substantial partnerships with china, this development could further improve bilateral cooperation. however, it is vital he we also consider the broader ramifications renminbi will have on other latin american economies as well as implications for our own domestic economy. today's discussion will delve into the meat of these issues, providing further context to the

report's findings, and to china's highly complex relationship with latin america. after i invite jerry to say a few words, we'll have two separate panel discussions. the first one moderated by sam fleming of the financial times. and then by jason marczak, director of the adrienne arsht center. please remember today's conversation is record and is being live streamed online. i encourage all of you to tweet about the event using the #rnb in latam. thank you all for joining us today the. it's with great honor that i now turn the stage over to gerry mato. thank you all so very much. [ applause ]. good morning, everyone, and welcome.

thank you, governor huntsman, for your kind remarks. it is is such a pleasure to be working with you on this important endeavor. governor huntsman, your remarks encapsulate why it is such an important moment to host this event. just a couple of things. after the renminbi. this is time for us to publicly launch our two-year partnership. an constitution known for its vision. an institution with whom we share many core values. without being redundant, during this two-year partnership we will dive deeper into issues of trade, investment, energy, and security in the china/latin american relationship with events around the world. we had a very successful private roundtable in new york on this topic which featured impressive group of people. i would like to thank those participants as well for helping

us form today's 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 china/latin american relationship and why now? after nearly 2500% increase in two-way trade since 2000, the terms of the china/latin american relationship are on the cusp of change. renminbi will make trade and investment between the two regions a more seamless transaction. at the same time a gobblized renminbi will mean cost savings for hundreds of companies in latin america and other emerging markets. there is some risk involved as our own market has shown. infrastructure for renminbi for more is still being built. what is the next phase of the

china/latin america relationship. will renminbi reshape the region? today as we see on the atlantic council, looking forward to a discussion that would highlight this issue. this is not about winners and losers but the opportunity and hurdles to overcome. we have an excellent lineup of experts to explain where china, latin america and u.s. will find those. with that i will turn it over to our first panel. thank you very much.

>> good morning, everyone. my name is sam fleming, editor of the "financial times." great pleasure to be here with a superb panel. as governor huntsman said, it was a giant leap forward for china, its inclusion in the sdr on saturday. it's a historic moment in terms of currency and economic development and china in the world. the ramifications are huge and that's what we're hear to discuss this morning. let me introduce an excellent panel to talk at these issues. on my immediate left, douglas arner, hong kong university, co-author of this morning's report, on his left is mr. tang, assistant professor at johns hopkins and visiting fellow at the dallas fed. on the far leave is clyde from

-- collide ward le, foreign exchange strategist. douglas, can i start with you? let me talk a bit about the report. obviously huge ramifications from this international realization. one of the arguments you make, ramifications go beyond world and central banking. perhaps you could spend a couple minutes outlining why this is such an important theme for the u.s. economy and china's economy. >> thanks for that and thanks to the council for being here and to my co-author andre in the front row there. i think one of the key points of both the report, as well as the answer to your question, china has reemerged as one of the world's major economies. with that has come a major position in trade, finance, and investment. one aspect of that traditionally has been increasing use of the currency. and so as we look at china's

increasing economic role in the world, it's 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 as the rmb emerges, the sort of challenges for global markets of the relationships between those currencies. >> let me ask about the -- the amount of use that the rmb is now getting in international transactions. it's fairly small still. in fact, very small. what are the key barriers to an increase in the use of the rmb? >> i think there are two sides to that. the first is that very much we're seeing -- initially we saw very rapid growth. if we look at asian currency uses, in the context of asian transactions, has become really very substantial. internationally, it seems to float in terms of trade payments somewhere between just below or

sometimes just above the level of the yen to just below the level of the canadian dollar. so still smaller, particularly when you compare that use to the size of china's trade flows. i think over the past year and a half, there's been a lot of attention on the internationalization process, but we've also had a lot of volatility in chinese domestic markets, in particular in the stock market and just over a year ago in the context of the currency markets. i think the context of some of those domestic volatilities has slowed progress down in the context of international usage. >> can i ask you about the moment that we are in history in a sense, why is china pursuing this internationalization process now? why is it a pro pitious moment

for china to be attempting to internationalize? >> i think this is not the first time that china wanted to sort of play a more major role in the global economy. so china joined the wto in 2001. that was sort of the water shade for china to be more engaged in trade and also international financial flows. in the previous regime, in 2006, they had a big meeting inviting a lot of foreign leaders, particularly those from emerging markets, to launch this thing called the go global policies. as a result, you see substantial increase investment in africa and other emerging markets. so, you know, this is a very different kind of globalization this time. so in terms of trade, in terms of investment abroad, china has been sort of pushing very hard. part of the reason is because, you know, the opportunities for investment in the domestic economy have been largely gone.

so how many high speed railways you can build, how many freeways you can build connecting second tier cities. but more importantly, something that i've been doing research on regarding china's economic growth, is that a lot of times, the chinese government wanted to use some external pressure to facilitate and speed up internal reforms. so wto is a good example. in fact, the prime minister at that time said wto is not so much about trade globalization, it's more about privatization. it is so difficult to privatize enterprises, so therefore, you know, wto provides some sort of external pressure and regions for them to basically privatize a lot of these firms. so this time i see similarities. on the one hand, china wanted to be more powerful in terms of, you know, inducing other countries to use their currency. but on the other hand, they also need some external pressure to

basically reform the financial and banking sectors. >> interesting. we obviously saw particularly earlier this year an awful lot of volatility in financial markets in china and also really confusion, i think, in a lot of other global capitals about what china's foreign exchange strategy was. how did the chinese government reduce that confusion and uncertainty and how successful do you think they've been? >> i think -- so i got my training in the u.s. you know, i am a big believer in sort of decentralized economy, free market. once in a while, there could be room for the government to intervene and sort of, you know, reduce volatility in the stock market. but the way the chinese government has been doing has been by and large disappointing. sort of scared investors from abroad and also scared domestic investors. as a result, the kind of housing

bubble we've seen in second tier cities in china these days is a sort of consequence of heavy regulation of the financial market, in particular the stock market. so that has been in my opinion, a backward development in terms of having additional reforms on the financial sector. so hopefully with renminbi being included as currency of imf, that would provide some legitimacy and also external pressure. so that on the one hand, their hands are tied, they could not just intervene any time they want. on the other hand, they would provide more confidence and credibility about the financial system. >> clyde, 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 -- especially foreign exchange markets more recently after all the jitters that we

saw earlier this year? >> well, i think obviously a year to 18 months ago, we were in a rather difficult situation. we had a lot of stresses in the global markets from anticipation of the fed tightening that was strengthening the dollar. and so a number of emerging market currencies were weakening at that time. at the same time, you had some concerns about the trajectory of growth in china, some were calling for a hard landing. and this led to -- and preceding that, of course, china had begun to liberalize some elements of the capital account to allow for investment from china to move overseas. of course with the offshore renminbi, cnh or other centers as well as hong kong, there's an ability for foreign investors to

speculate on renminbi. it trades as a freely convertible currency offshore. these factors were contributing to downward pressure on the currency. what we've seen before, especially in the global financial crisis when obviously we'd had less liberalization at that time, but we saw from the authorities in china that they -- they tend to have a batten down the hatches approach to situations such as this. and i think what's important is to just focus on the long-term trajectory here of the reform and internationalization process. we believe that that will definitely continue. we think that what we saw 18 months ago was -- was more a blip in terms of, okay, let's calm things down, try to remove the dislocation we saw between the onshore currency and the offshore currency. i think after sdr inclusion we're actually going to see anselleration of reforms that make those two markets trade much more in line with each other.

>> let me ask about the implications for corporates, specifically, in this internationalization process. douglas's report refers to the idea that transaction costs could be reduced. what kind of benefits are you surnl seeing for -- currently seeing for your clients in terms of this process? >> we've seen over the last few years, the ability for corporates obviously to transact in remnmbi. but there are significant constraints with that process. you don't have control of the currency conversion. you're essentially leaving it to the supplier or the payer to manage those foreign exchange risks. and of course often prices can be inflated to take into account of those foreign exchange risks. corporates now are really finding out if they're, for instance, sourcing manufacturing

goods from china, they're asking for invoicing in rmb. they're setting up rmb accounts in the offshore market which are very easily funded, and then making payments which have no documentation or regulatory requirements attached to them. they're finding up to 4% savings on what they were paying previously. it's an important process that corporates need to look at. they need to understand, if you're going to do business with chinese companies, then you really need to look hard at using the remnbi as a trade currency. >> douglas, what did your research throw up in terms of the potential benefits but also the barriers at the moment? >> i think i highlighted a couple of them. i think from the benefit standpoint, one is that as we see ever increasing trade and investment flows using the domestic currency provides an

alternative in accessing the domestic chinese market. one of the themes we picked up on the report is that much of the trade and investment into latin america so far from china has largely focused on commodities and resources. this is something in the context of thinking about the region going forward, we think there's a need for rebalancing that direction and that use of the rmb to target the very large and rapidly growing chinese market is one of the important options. >> okay. could you talk a little bit about the same point, targeting the chinese market? what are the main barriers at the moment for that targeting process? >> i think the main barriers for more investors and banks around the world to use the renminbi, substantial control of outflows

between chinese and investors. even though the transaction costs could be substantially reduced as a result of it being included in sdr and the affiliated reforms, you know, the amount of money that can be channeled out and in are still highly regulated. five years ago, i think the chinese government was probably worried about capital inflows, driving up the stock market and housing market. but these days they're more worried about capital outflows. the kind of investors that can still invest in china, the so-called qualified institutional investors, there are 300 of them. at the same time, the domestic investors who can invest abroad are the so-called quality domestic investors. so without substantial removal of the capital control, i don't think at this moment we can say much about how much the renminbi

could be a major currency yet. although, china's government was very committed. in fact, two years ago, the premier said by 2020, the chinese government is going to have full -- for the remnbi. now almost the end of 2016, so there are four more years to go. of course, we're talking about china. the magic will happen, hardly imagine in four years we'll see renminbi fully convertible mostly because of the capital control and partly because the financial market still need a lot of reforms for that to happen. >> i'll go back to you in a second. clyde, what are your observations on it? >> no, i think over the last few years, one thing that we've noticed, and if i may pat ourselves on the back a little bit, is we've tended to in our research talked about the pace of reforms will be faster in some respects.

certainly in the period of 2010 to 2013. and that was definitely true. so i think there is scope for an acceleration of reforms going forward. i think we've been through a rocky patch, vis-a-vis, the potential for the chinese economy and what's happening in global markets. there are still risks out there. we've seen with the brexit vote. we've got the u.s. election coming up. you know, there are uncertainties. and i think that the authorities in china are going to remain very cognizant of that. but assuming that -- particularly on the domestic front, china's economy remains steady and stable, we don't see any capital outflow pressures, i think what you could see is an acceleration of the reform process. whether it will have full convertibility of the capital account by 2020 remains to be seen. but i couldn't -- i wouldn't doubt it too hard. i think already we're beginning to see major central banks around the world, including in

latin america, buying renminbi for their reserve assets. the numbers relative to their total reserves are small, but that's definitely the trend we're seeing. i think we'll see that continue. >> douglas? >> just a couple follow-ups on both of those. it's sort of an ongoing joke that for the past 20 years we've been five years away from capital account convertibility in china. over the past couple years, we thought maybe that five years might actually happen this time, 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 of use of central bank reserves. since the opening of the interbank bond market, are you seeing more basically direct access? >> yeah, we're seeing significant inflows over the last six months, more than -- i mean, prior to march of this year that the inflows were

actually pretty -- pretty negligible. we were obviously seeing outflows in six to twelve months prior to march. the last six months we've seen significant pickup in inflows from both institutional investors and also from central banks as well. >> this takes us back to the trade point. one of the reasons why central banks are going to be increasing the reserves is that given the trade flows and if we see as we are seeing an increasing denomination of those trade flows in rmb, there's a necessity for central banks to manage those. as a result, central banks around the world have a need to access assets particularly in the domestic bond markets to manage their own reserves to manage flows as a result of trade and investment. >> does that -- do you agree with that -- that assumption? >> yes. i think in the long run, there

will be increasing amount of sort of reserve related investment going into china. there have got to be prerequisites in the sense convertibility, we don't expect full convertibility but level would give foreign investors some confidence that they can convert rein men -- renminbi back to their own currencies. i remain very optimistic that more of that is going to be involved in renminbi. i do some research on china/africa relations. i realize one trick -- i shouldn't have used the word trick. one strategy that the chinese government has been using, basically investing a lot in natural resources in africa,

renminbi. in turn those nations will have to buy chinese goods in renminbi. so that's an effective way to put renminbi into global currency. so on the trade side, i'm very optimistic. on the financial side, the reason why i'm a little bit more reserve is because i think there still quite a bit of, you know, legal reforms and financial market reforms that need to be done before that can happen. you know, morgan stanley i think had a very optimistic estimates that in the long run, i think they have ten year in mind. that there will be $1 trillion u.s. dollars worth of renminbi flowing into china as a result of currency reserve purposes. >> let me take a step back now and look at the bigger picture, in particular, the announcement -- the landmark reached over the weekend with the sdr. douglas, what are the practical implications for this, this

inclusion in the sdr? how important? is it mainly a symbolic thing or do you think it's a major thing for the development of the chinese currency? >> i actually go back to clyde's earlier points, when we look at the sdr inclusion, there are really two principal reasons why it's important. the first has to do with the process of domestic financial restructuring. in other words, much of the strategy of the chinese leadership saw sdr inclusion much in the same way as wto joining. in other words, this was a way to lock in the reform process. i think internationally as well. once that became understood, that sdr inclusion was one way to lock in this continued process of domestic financial reform, that has tremendous importance. the other aspect is largely political. that -- it's something that is symbolic and important from the

standpoint of as trade flows increase, the redenomination of central bank assets, the sdr inclusion makes it simpler. from the standpoint of will this cause a dramatic increase in transactions, i think the answer is no. it's a much, sort of longer term restructuring and political recognition process. >> i'm taking -- keeping the view from 30,000 feet, can we talk a little bit about the implications for the u.s., then, as the prime -- holder of the prime currency in the world. over what period could you start to see that being challenged, clyde, 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. just in terms of currency flows, the bis does a tri-annual every

three years, a survey of the exchange market. the u.s. dollar is still by far the dominant currency that over 90% of foreign exchange transactions are with the -- the dollar is one side of those currency transactions. so that's not going to change. the remnbi is a very small portion of that. what's interesting in that survey, and we've seen as long as i've been in the market and watching this survey, you've seen volumes go up every year. this is the first year that total fx volumes actually fell versus 2013. what's interesting, though, the renminbi volumes are up to the eighth largest of all currencies. still a relatively small number compared to the total dollar transactions. but interestingly, in a three-year span when total

values have fallen, renminbi volumes have actually risen. commodities are priced in dollars. i don't think that's going to change any time soon. so i think latin american commodity exporters may struggle to try to -- to shift -- or the chinese certainly will struggle to try to shift that pricing into renminbi, so i don't think that's going to change, but i do think it's significant for latin american exporters to look very seriously at being paid in rmb as opposed to dollars for those exports to china. in particular because chinese companies now are actually running into some roadblocks and hurdles themselves domestically to pay for their imports in u.s. dollars. it's becoming increasingly easier for them to do that in

rmb and so i think they -- they will be quite open to latin american exporters to china approaching them and being paid in rmb. it will be more convenient for both parties, and potentially see cost savings for the latin american companies exporting to china. >> what are your thoughts on the same topic? what are the implications for the dollar and the u.s. more generally? >> i think the way i would analyze this is to separate the denomination and currencies into those for trade flows and those for financial flows. in terms of denomination and renminbi in trade, as i said, i think there will be an increasing use of rmb, particularly within asia. trade is such a complicated subject these days. increasing globalization. so there could be sort of network and multiplying effect which will push the rmb to be more useful in international trade. in terms of the denomination for financial transactions, i think

renminbi is still sort of far away from u.s. dollar as being major safety investment asset. as i said, because of in effect convertibility and associated inefficient financial system, but let's see. ed give china 10, 20 years, the gap will be reduced. for now, i wouldn't be worried about the u.s. dollar being displayed by any major currencies in the world. >> douglas, i'm going to ask you to turn to that question and then we'll open it up to questions. if you have any questions, do raise your hand up. >> just, i think i would nuance that a little bit. what we're very likely to see in the new future, the rmb will emerge around the third slot.

that in the context of chinese economic size and relationship, you can expect that it will probably eclipse the yen in the near future. >> near future meaning -- >> next year. it almost did it this year. so this is something that is near term. >> yep. >> i think what we're looking at is three major currencies going forward. i don't see any likelihood in the medium term of the rmb eclipsing the dollar, but something in parallel to the euro makes a great deal of sense. finally from the standpoint of the financial side as opposed to the trade side, we have now seen china emerge as a net foreign creditor, as one of the world's major foreign investors, and there's an increasing push for that investment and credit to be provided in rmb in international markets. as a result, 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 corollary of that. >> right. questions from the audience? please raise your hand and do say where you're from when you ask your question. gentleman here, please. and please wait for the microphone. >> i have been in china. i will ask you a simple question, actually, because there is a trade imbalance between all of the countries, between china and the rest of the world. eventually chinese people will demand better life, better standard of living, et cetera,

et cetera. so my -- from other countries, they will say no more chinese product will be entering into our countries. the current inventory will go down with the same situation. there's no way they can sustain. if all the country close the market and imbalance is so great what would be the future of chinese currency if this happened? >> so if i understand you correctly, so you concerned about the fact that foreign consumers may not want as much chinese goods to be exported to those countries, therefore, the demand for renminbi would be reduced. is that the conjecture? so i'm a trade economist, so i believe in competitive advantage. i still think that china still has a lot to provide in international trade.

labor costs have been increasing quite a lot, but compared to those in the mexico and the u.s., they are still much lower. what i worry more about is basically the increasing protectionism that we see in the u.s. and around the world. so that may push chinese growth, you know, back by 1 or 2 percentage pointsf i ever to put a number on. you are absolutely right that the renminbi has been weakening since november last year. i don't think that sort of sudden, you know, increase in trade protection will lead to a collapse of the renminbi just because there's still, you know, a lot of investment and a lot of demand for chinese goods in the absence of protection. >> why don't you invest inside of china -- better standard of living -- [ inaudible question ]

it's going to happen. 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. then we'll move onto another question. >> i was going to say that actually we're already seeing this as an important trend. wage levels are increasing. consumerism in 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 scale. and very much renminbi internationalization is in fact part of that process to drive the development of the chinese economy. in fact, what you're saying is already happening very dramatically. i see it where i live in southern china that wage levels have increased dramatically. and the sorts of low cost manufacturing that used to dominate in southern china have been pushed out to vietnam,

bangladesh. increasingly what you see is higher value added electronics and, in fact, quite innovative developments. taking over where used to be textile factories. >> okay. another question, please. lady here first. please wait for the microphone. towards the front. a little bit further. i'm sorry. thanks very much. >> hi. from university of hong kong. my question is partly related previous question on the domestic chinese reforms and as i weigh in, doug also mentioned boult this renminbi internationalization is more -- would have deeper implications with the domestic -- locking in of the domestic chinese reforms. i wonder how much of these domestic market reforms are going to cost chinese in terms of, for example, unemployment, or we are talking about rising

wages or increased cost of living and other things. so would these reforms, market reforms would be worth the cost in terms of unemployment, social unrest, all other -- >> okay. do you want to take that one? >> yeah. >> what is the cost? >> i think the quick answer is that the sort of view 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 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 the 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. >> clyde, how bumpy is this proving to be? >> i think remarkably smooth so far. i think the government's switch to focusing on domestic consumption a few years ago and part of that reform process was trying to disencourage savings from the domestic -- chinese population. typically, the chinese are very

good savers. they save primarily for retirement and their children's education and health benefits. what the government has been doing, they've been building new public schools and hospitals to try to encourage you know dissavings and more consumption. in general, that has become a relatively successful policy to date. so i think this trend will continue. i think the economy is evolving and it's certainly moving away from the export-led economy. and, you know, i think as long as you don't see significant pressures in certain parts of the economy, especially the property sector, then i think that we can be relatively sanguine about the outlook. >> one more question, towards the back, please. right there. thanks. >> hi, thanks.

just a quick question. sean minor from the peterson institute. collide, you mentioned that you think the sdr inclusion will spark reforms that close the gap between onshore and offshore rmbs. is that because you think it will move more towards convertibility or another reason? >> the difference between the onshore market and offshore market, i'll just say a couple of points to those unfamiliar. if you imagine the onshore market as domestically in china. we talk about the offshore market as all of those other centers where you can trade the renminbi on a free basis. it's literally like trading the euro. they set up clearinghouses in 16 cities around the world now. the first one was in hong kong, and that's still where the most liquidity exists. you have to imagine a bigger pool of liquidity in the

renminbi in the onshore market and offshore market. what we've had at certain periods of stress is the -- is the liquidity in the offshore market become smaller and that leads to pressures on the currency and the money market. and we see money market rates going up, we see the currency weakening relative to the onshore market. and certainly this has been a concern. since 2010, when we saw the advent of the offshore market, there have been a couple of periods of dislocation between the rates between the on shore and offshore market. in some cases onshore renminbi was trading more strongly where there was extreme demand for renminbi assets. more recently over the last 12, 18 months you've seen it go the other way with stresses the other way. 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 will encourage the process 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, historic moment, historic week in terms of currency policies around the world. a lot of this is going to be debated over the next few days because the imf and world bank are having theirable meetings and this is germane to those decisions. this panel, extremely complex process and has a very, very long way to go. for the time being, please join me in thanking the panel. [ applause ] >> got the next panel coming up and --

>> great, well, thank you very much. good morning, i'm the director of the latin america economic growth initiative at the latin america discussion. thank you for having the great discussion. do doug, heiwai. the only problem with the first panel, you really set the bar for our second panel. before we start, i'd like to congratulate douglas and andre in the first row on an excellent report on a topic that i think may be overlooked by some as just a technical development in the world, but really has the potential to reshape how business is done across emerging markets, including latin america. that's really no small statement, but frankly it's true. the renminbi becoming an international reserve asset is not something to be overlooked. as our first panel said, huge changes not just in chinese

markets, but global implications. we looked at the ins and outs of china's currency policy. the next panel is going to look at what this means for latin america. we have a dream team of speakers, my dream team of speakers at least, to look at that. i'm going to sit down here. the first speaker -- you have their full bios in the handout. to my left here is barbara, kotschwar, senior investment policy officer in the trade and global kpe tifs global practice at the world bank. in addition, she spent eight years at the peterson institute. you published on a number of topics. 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. that's ambassador luis miguel castilla. ambassador castilla was previously peru's ambassador to washington up until a few months ago. and among his many other responsibilities in his life, served as peru's minister of economy and finance under the administration of the president. miguel, now that you're out of government, we can ask you those difficult questions. right? to miguel's left, claudia, trevisan, washington correspondent of a newspaper that's familiar to many. for those who it isn't, it's one of brazil's leading and most influential newspapers. among claudia's many foreign assignment she spent six years living in beijing. but that's not her only claim to fame when it comes to china. you've written now 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 actually encouraged the speakers to disagree with each other. because that's what makes a panel fun. let's see if y'all follow through on that. what we're going to do in the next half hour, we're going to look at the general picture, and then we'll look at risks, investment potential, and of of course, although this is about china/latin america, we're here in washington, so we'll look at the u.s. implications of renminbi internationalization as it pertains to latin america. let's get started with you barbara. you've done a lot of excellent work on chinese fdi and latin america. do you see it reshaping the investment picture across the region in the short to medium term? this is a tough question. are there implications really still so much unknown that it won't be clear for years to come of what the real impact is?

>> thanks for such a narrow and specific question. >> it's a great way to start off a panel. >> it is. actually you've given meedette it to say we really don't know. >> i'm not going to let you get away with that. >> i probably should stipulate that although on my bio you see that i work at the world bank, my views do not represent those of the world bank, any member countries, any of my dear colleagues, their brothers and sisters. i'm probably here more with my georgetown professor hat. >> one of your many claims to fame. >> one of my 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. you know, china's 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 for --

>> can you explain what a swap agreement is 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 can be paid for in renminbi and vice versa. that brings up an interesting point douglas made on a previous panel, the hope this would lead to rebalancing of the economic relationship between china and latin america, as has been mentioned many times, there's a massive trade imbalance between china and just about all of china's trading partners. in latin america, that's certainly a big deal. latin america imports lots of chinese goods, but hasn't been able to break into the chinese markets in terms of export and investment. we'll talk about investment in a little bit. if the internationalization of the currency, of the ability to

use the renminbi can expand that, that would be great. and if latin american companies can gain greater access to the chinese market, then this would help latin america break into a this said, china has been under taking some reforms of its foreign direct investment regime, but there are still tremendous regulatory administrative and legal barriers in addition to reserved sectors. so i do hope this is a signal that china is under taking further economic reforms and that those can be of benefit to latin american companies. >> barbara talks about the first panel. this has been something the latin american companies are struggling with. how do you break into the potential of the chinese market. ambassador castillo, or miguel as you prefer to be called, rmb use provides a lot

of opportunities, new opportunities for latin american countries, investment in china to attracting new investment from chinese companies. all of this coming against the backdrop of a boom of chinese investment in the region. so i want to take you back to your days as finance minister. i don't want to bring up any bad memories. i'm going to take you back to these days. what steps should the finance ministers take to seize on the opportunities to bring. and there is also some risk as we discussed in the first panel. from a financial perspective, how do you mitigate some of those risks? >> well, thank you, jason. and let me also congratulate the authors for a very insightful report. actually when we talk about latin america here, i want to be clear. here we have to do the distinction. one thing is the reality of cash starved country.

they need it to build reserves. i won't mentioned country. but you know it went into a swath agreement. and the other thing is a sophisticated country that would like to give options to investors. so there are different motivations for countries. i think opportunities trade wise, i think commodities will still remain a driving factor for many south american countries in spite of what's being told. and actually i think for the commodity which would perhaps fit better in terms of rmb denomination, i think there's still a lot of, as the same line that barbara mentioned, a lot of restrictions to enter the chinese market. one talks about paris. one looks at the subsidies or

the v.a.t., the chinese charge for imports for different agricultural products. they are huge. over 50%. so it is very difficult to access the chinese market for nonstandard commodity products coming from anywhere in the world, particularly in latin america. i would be less bullish in terms of this huge opportunity there is. i see it more of an opportunity in terms of locking in reforms, in terms of trying to liberalize its capital account, he deepen its financial market. i see that as the main, you know, objective of this process of sdr in -- rmb inclusion on the sdrs. i wouldn't be too overoptimistic in terms of the new way for trade to be nominated indeed rmb or finance. in terms of finance, there also needs to be an adjustment.

and i'll tell you the case of peru, for instance. in my own country, the chinese were very aggressive in terms of opening up one branch of their -- of the chinese. our legislation has constraints towards linked companies. and given that for tax purposes and for banking purposes if you're linked to a home office, a home firm, then there are restrictions. and given that most things in china are owned by the government, that implies we have to change our banking system, our tax code to be able to accommodation. there are also restrictions in that regard. in terms of risks, i think the document does a good job in

terms of the main objective of picking a way the current risks. but still we are a region i think primarily seeking towards reducing its mismatches in currency. you see because of chinese restrictions the potential to move into that market. peru just do an operation in the market to be able to increase the local currency denomination of its debt. i think firms on the corporate side are trying to minimize and try to hedge any, you know, potential currency mismatches they may have. >> so you're saying even though there is a reduction in transaction costs, because of the renminbi, like doug, there is more bullish, because you see of chinese restrictions, that potential for latin-american companies to move into the market. >> i see this as a long process. it is very country specific. i wouldn't actually pull all latin american countries in the same bed. >> claudia, miguel mentioned he

didn't want to mention any names of countries, but he mentioned about china being -- becoming a lender of last resort in the last decade for certain countries in the region. i'll name the countries. one of them is venezuela, and the other one is argentina. clarify this, not under the current argentine government, and it helped to prolong conditions in those countries. so why is it in latin america and china's interest to ensure its loans and investments are being used, and again, for sound technical and economical -- i say latin america, but miguel mentioned, talking about specific countries. >> i think the main reason is to try to guarantee that these

resources are used in the most efficient way possible. and they are used in projects that make sense from an economic point of view. and does not perpetuate a development model that isn't sustainable. i think that's clear in the case of venezuela. falls on five china gave 60 billion u.s. dollars to venezuela, and no indication that the oil production in venezuela is more efficient. there is production and it is unprecedent. from the chinese side, there is the evidence of not being repaid from the loan, and i think one could also agree that there is a political backlash, being the situation where you have a change in the government after being 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. assumed office last year, and initially there was suspicious in the new government that china was increasing a lot its influence in argentina, but the suspicion quickly vanished. had two meetings with the president this year, and china has announced in the first semester of this year, investments of $25 billion in argentina. so i think there is a gravitational pull on the chinese capacity to export capital, political backlash. >> of course, from china's

perspective, they want to -- the chinese want to invest in sound policies in which the investment will be able to pay back their investment too. >> yeah. >> which is a concern. >> yeah and i think from what i hear and talk with people, i think the experience of venezuela, kind of had learning effect from the chinese side to be more cautious in their decisions, their land money and to be more concerned with the economic and returns of these investments in the long run. >> that's great. thanks, claudia. miguel, i want to turn back to you. there are cautionary winds arched internationalization of the renminbi, and in this report, which is i think should be on everyone's chair and i highly encourage you to read it,

it is a fantastic report, although i am a little biased. in this report, we know the dynamic that decreased investment can be a win for countries but also a cautionary notes. how an increase in renminbi could lead to greater fears of over dependence on chinese, chinese trade, chinese investment, chinese finance. so miguel, from your perspective, what steps should be taken to ensure the increase or potential increase of renminbi, the renminbi brings in investment to necessary sectors in latin america doesn't result in overdependence on china, or too farfetched? >> i think that's too farfetched. still, you know, our dominant investors, our countries that, you know, the european, the u.s. are dominant in the countries. i would say that could play more

towards africa, chinese relationship than latin america, you know, relationship of china. just to give you an example and beyond commodities, we were discussing with claudia before coming here, the first official visit of peru's new president was to china. to actually signal his intention to deepen, you know, the link, and to attract investment, not to, you know, ask for loans, which is a different, you know, important point made. but we were talking about this bill, withdrawing brazil, and a huge train that was announced when the prime minister of china came to the region a year ago. and this was actually -- came by and that huge project of $60 billion was reduced to a commuter train outside of lima

as a priority. so this overdependence theory, it doesn't really apply. we do still have huge necessities of investment, of fdi, which is receding in many country, and obviously we're open to receive a lot of investment. i don't see any particular fear. also, i see a change in the nature of investment, even extract sectors. back to the case of peru. 20 years ago, we privatized the public s.o.e. firm of iron. and it was actually really bad experience, lack of 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 hong kong and london market, so very sophisticated run, you know, under high standards. and there has been a change, i think in also the composition

and type of investors we're seeing from china coming into the region. >> barbara, on that point, do you see as miguel mentions, more sophisticated investors, more sophisticated projects, but you know, with the -- talking about the renminbi internationalization that can open up the latin market to chinese companies that don't necessarily have access to international credit in dollars to invest, it's -- previously companies were constrained by that. you had to be able to invest and that access to dollar credit. how can latin american companies best evaluate the investment offers that could come from this new crop of chinese companies that don't likely have had as much global experience as something we've tackled a little bit in the report, but i would love your perspective on this. >> two things. one, the composition is changing to a certain extent.

there has been a chinese learning curve. i think peru is sort of the poster child for that. both sides have really gone through an evolution in terms of country like peru, setting out standards for all investors, including the chinese investors, and china, through changes in its policy and also just learning the peru environment. 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 peru for decades, gone through difficult and positive periods, and i think that has contributed somewhat to the increased sophistication and increased also sophistication of investments in peru in some of that change. you see that happening in other countries in peru as well. that said, china still invests

predominantly in natural resources, and infrastructure. so china is natural resource seeking in and market seeking investor. if the naturalization can somehow move china more into an efficiency seeking investor and help latin-american companies become part of global value change, that would be a tremendous help to those countries, and i suspect that another part of your program, the pacific alliance companies are thinking about ways to align their policies in order to do that. the second part, should we worry, should latin-american companies worry about the chinese companies that are coming in without standards, without having to hold up to sort of new york stock exchange standards and without u.s. dollars. well, if a chinese company comes into a country like peru, it is going to have to meet the standards of the peru peruvian environment. it's going to have to meet labor

standards and environmental standards. here, i think there is a burden on latin american policymakers to think about what risks might be associated with investment from companies that which they may not be as familiar. really make some, you know, resource allotments, so that those standards can be enforced, particularly at the local level, where you sometimes don't have great budget for evaluation of this. 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 are probably not going to do well in the market. >> well, looking at chinese investment into the region, one deal on the table is possible chinese financing of petro, brazil's state oil company, with a potential $10 billion loan from chinese banks.

let's look at this and the brazilian company, brazil is important because of the huge increase in trade and china and the last few years. but how significant would this deal with for the overall state of chinese investment in brazil and along the lines of our topic today, does renminbi make more deals going forward? >> well, petro is the largest company, and largest corporate debt in the world. it has a debt of $125 billion, last year, it lost its investment grade, which made it more difficult, more expensive, chuck says the capital market. and the chinese have been one of the main sources of finance for petro grants.

and these deal, it has been negotiated since the beginning of this year. there was an expectation that it would be announced that during the visit of president michelle pimenta to china earlier this month. but the negotiations have not been concluded. but there is an expectation that 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 to show the deepening of the finance links between the countries. and i think one of the possibilities that rmb international might open provided that the reforms that are needed to get internationalization are by the chinese government is probably

the possibility of issues ponds in the chinese market and have one more access to a source of cocktail inside the china, chinese market. >> president temor was recently in brazil, his first trip after he was confirmed as -- sorry, with -- >> yes. >> his first foreign trip after he was 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. >> 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 rousseff was completed in the afternoon of august 31st. he was sworn as president in a couple of hours. he was on a plane to meeting in china. there was so big uncertainty of

who would represent brazil in the meeting, that the dignitaries have the names of all the representatives of all countries, and in the case of brazil, it was the leader of brazil. because nobody knew if it would be temor or vilma. and president temor had a meeting with president xi jinping and besides that, which i think is more important to our discussion here, he took part in a seminar to present the opportunities of investments in a huge infrastructure program that launched earlier this year. it's projects that total around $100 billion.

and there were 250 representatives of chinese companies. and i think there was a great deal of interest. especially in projects related to transport and logistics that could make it more efficient to the export products from the region to china. and i think there is -- the recent increase, especially last year in invest, chinese investments in brazil, i think it is a factor of convergence of factors. the need of chinese companies to invest abroad. the evaluation of the currency that made it cheaper to investment in brazil, and also something that we might see the effect more in the future, the huge investigation of corruption scandal in brazil, that affected many of the large brazilian companies that used to take part on infrastructure products.

>> i want to have one last round of questioning, just quickly on the u.s. implications. we obviously are here in washington, so we would be remiss if we didn't talk about the u.s. implications, but then the last few minutes to open up questions to the audience. i know there was one in the first row from the last panel. we can take that first. but u.s. implications. miguel, you were -- you served most recently as a diplomat, peru's ambassador to the united states. and i think we've talked about in this panel that the potential implications that renminbi has for bringing in more investment into latin america, i think the panel seems to conclude that there is probably less potential that that will bring for latin -- countries of into china. when you think of chinese investment into the region, how do you see this 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 of this? >> actually, i think more important is the lack of approval of tpp than the discussion to tell you the truth. and actually, now that apec is being chaired by peru. there is a tension in terms of actually pursuing a free-trade agreement where china is part of it, and that's the blueprint being discussed in lima at the end of, you know, you know, in november, when we have the summit, summit of leaders. and what will happen, you know, if the tpp postponed until who knows when.

that's more important in terms of the impact on latin america, china, plus relationship. i see real tensions. i see, you know, a concern from the u.s. administration. of giving away space for, you know, chinese involvement. obviously, the rmb will be a vehicle to accelerate the flows and to -- it is another way to join both regions. but i suspect that actually now the focus will be what happens with trade agreements. and that's actually something that we are more concerned as a former ambassador. >> as a former ambassador. you still carry the title, though. barbara, do you agree with miguel? also along those lines, maybe this can be an opportunity of

not necessarily of u.s./china competition, but does this present an opportunity of working together on, you know, the, you know, kind of greater good, which is the economic development of latin america, and rising up the good of the region as a whole? >> so i can't disagree with miguel, even though i'm supposed to. >> i'm trying to get something to disagree with each other. >> i like your scenario, the u.s. and china working together for the greater good of latin-american, but i'm going to disagree with you. >> perfect. >> i'm trying to get somebody to disagree. >> we first need to stop about building walls against our major trading partners in the region and also just, you know, making statements about trade wars with china is not helpful for the greater good of the latin american region either. peterson institute has done

really nice work on what that might mean for the u.s. economy, for the latin american economy, it would be a disaster. the u.s. and china being two major trade investment partners. so if we want to constructively engage with china, yes, that would be wonderful and maybe apec is one forum for which that is being done to a certain extent. and that could be used as a springboard for that. i think the united states has an opportunity to show latin america that it is committed to the region with a strong latin america policy that does not include trade and investment barriers. >> i want to make sure we have time for questions. so we're going to go back to jerry's question. >> no, it is a different question. >> okay, good, different panel, different question. >> i just spent two weeks in china recently, and one thing that i find out is that the odi

in 2016 is going to be first time higher than the fdi. so china is going out to invest. having said that, the investment in china out of the financial, like the chinese development bank in brazil, we didn't see too many projects coming in the infrastructure of the real projects we can touch. the biggest one was probably bahamas which was a failure. $3 billion went down. and the -- i don't see many more investments going to mexico, because it is kind of coke and pepsi. so where you see real projects going, this is a question they asked me, so i'm asking you, going into latin america? specifically, there has been an announcement of $250 billion going to latin america in the next five years. >> thanks.

>> infrastructure still, you know, would be the sector. we still have huge gaps to fill. i don't know whether -- each country has its own framework, but we follow private/public partnerships. chinese have been quite interested in many of the big projects, extra line of subway in lima or other countries. there is also this pragmatic view. huge train, 60 billion between brazil and peru, and now it is a commuter train in lima. there is some realism into many projects. i would say infrastructure and energy. >> do want to add something? >> it shows how difficult infrastructure projects are. everyone was expecting that things would go much more quickly and now reality has set

in and expectations are being ratcheted down. hopefully, pragmatism will prevail. the viability of funds will stimulate. there is still a pretty good potential. i think brazil being a big potential market, but this last year hasn't been 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 excitement fireworks view. i think that is an area in which there can be, not to be negative on u.s./china cooperation, but where u.s. and china could help increase welfare. >> i think the case of brazil, it is also infrastructure, and i think there is an effort with this government to redone the

regulatory in which environment in which this projects are done. there is decisions also to do public/private partnership, and i think one area that will probably be attractive is oil and gas. there is to date, they are voting a change in the rules expiration of the reserves. and eliminate petro grass having 40% participation in each project, which will make it more attractive to foreign companies. >> as a huge development, something we at our center had a report on that in july about brazil, the potential of brazil's oil and gas market, specifically how to propel it. we have time for one last question. we can maybe take these -- i saw

your hand. sorry, sir. i had the fifth row first. say your name and organization. >> benjamin christfelt, johns hopkins university. i would be very interested to know if the opposition of renminbi in latin america increase scrutiny or maybe ease transactions, ease the sort of ease in, looking at transactions between china and latin america? they're both very cash based. i'm encouraged having taught in colombia that generally young entrepreneurs don't even know what the rmb is, but there will be possibilities of easing trade, easing transactions, and i wondered whether this will enable greater scrutiny. we focused on the high end, big investments, but the possibility of easing trade, trade flow and trade flow between china and

latin america. >> thank you for that question. miguel, barbara? >> i would say -- so, i think that's what jason is hoping in his question with you, cautions 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 an indication that people are paying more attention to this. and i suspect that that also depends on how much latin-american companies and governments use the renminbi. so i think that people like yourself, paying attention to this and writing papers and so will probably help increase the knowledge among young entrepreneurs that the renminbi exists, and it may become an

option and may be able to take advantage of that potentially. >> barbara, that's a great way to end our discussion, give homework to the audience. to help us. i would like to end by thanking along with peter here, i want to thank maria, standing in the back, working tirelessly to help make this happen along with ivy and her whole team at the art center. i would like to thank adrienne, our founder, for being here today, and also jerry and the whole team, martin, jim, everyone over at hsbc, for their sponsorship, not only their support but this whole initiative, this allows us to do, washington and beyond, looking at the details of the chinese relationship with markets like latin america, and realize there is no black or white answer. the answer always lies somewhere in the gray. thank you very much, panelists

and douglas and andre for excellent report, which you haven't read. it is right here. [ applause ] >> a look at some of our live programming coming up today across the c-span networks.

in about half an hour or so we'll bring you a briefing on veterans health care, including an introduction to the va health care system and a discussion on policy prospects for the future. it's hosted by the alliance for health reform. you can see it live starting at noon eastern on our companion network c-span. it's a look at the global response to the refugee crisis, representatives from the world bank, the world food program and others will participate. you can see that live at 1:00 p.m. eastern on c-span2. and then we'll turn to the road to the white house later today with the two major party candidates. donald trump will be speaking at a rally in johnstown, pennsylvania, live at 4:00 p.m. eastern on c-span. short time later his democratic opponent hillary clinton is appearing in cleveland in the advance of the world series. you can see her comments live at 4:30 eastern on c-span2. this weekend on american history tv on c-span3, saturday

evening just before 7:00 eastern ohio state university's michael les benedict talks about the 1866 supreme court case where the court ruled it unconstitutional to try civilians in military courts while civilian courts are operating. >> the milligan trial was part of this debate, designed to prove to the public that the danger was real, and that therefore, the military trials were justified. and as we know, it worked. lincoln won the election of 1864. >> and at 8:00, george washington university professor chad heath on the origins of the gay rights movement. >> the gay liberation front is playing on and building on all of the lessons that the whole other array of social and cultural movements from this

period are developing, the anti-war movement, the civil rights and black power movement, women's liberation movement. they're taking the best aspects of those and building upon them. >> sunday evening at 6:00 on "american artifacts" we take a tour of the woodrow wilson house with its executive president robert enholm. >> he responded to the crisis sending food aid to armenia. the people were grateful and a group of women touring the united states raising money for are teenian charities were here in 1917, just after we declared war, and presented this painting to president wilson. >> and at 8:00 -- ♪ you like ike, i ike ike, everybody likes ike ♪ ♪ for president ♪ hang out the banner beat on the drums ♪ ♪ we'll take ike to washington

>> the history of presidential ads gink with the tv jingles through the 2016 presidential campaign. for our complete american history tv schedule go to cspan.org. up next, biodefense experts talk about biological threat preparedness. this event co-hosted by the bipartisan policy center in kansas state university outlines strategies for protecting the public and the agricultural industry from bioterrorism and infectious diseases. from earlier this month, this is just under two hours. >> welcome. good morning, i'm chief medical adviser at the bipartisan policy center. i want to welcome all of to you today's event entitled bioagro defense policy, america's food supply, health and economy at

risk. today's topics bring back memories of my first task as a public servant which were to number one work on medical counter measures, distribution in the event of a wide scale anthrax event and number two to develop the hhs pandemic influenza plan. bird flu, you will recall. in spite of much progress, the 2015 bipartisan report of the blue ribbon panel on biodefense reported that the nation still remains highly vulnerable to biological threats either intentional, via biological terrorism or unintentional, via nature itself in the form of emerging and reemerging infectious disease often animal in origin.

critical consideration in the national dialogue on biodefense includes the need to protect america's food supply and today's event highlights the importance of agriculture and biosecurity as well as highlight potential strategies, tactics and policy solutions to ensure the inclusion of agriculture into biodefense for the next administration and congress. we are fortunate today to have two outstanding panels of national private sector leaders and public servants to lead our discussion. at this time without further adieu i'd like to introduce the moderator of our first panel our inspiring leader here at bpc, founder and president of the bipartisan policy center, jason grumier to get us started. >> thank you for raising the bar. i'll do my best. welcome everybody. we have a really interesting conversation here today and really it's important because it's a conversation that we

think is not happening enough here in washington. i'm going to introduce our panelist, get into conversation among our leaders and have some q&a. first to my immediate left senator majority leader senator tom daschle. i think he's well-known to everybody in this room. he has an insatiable desire for public policy. he's led i don't know how many initiatives here at the bipartisan policy center. he's also a member of the blue ribbon panel on biodefense so we'll have a chance to talk to tom about it, important insights the panel has brought forward and i'll finally note that tom is also really kind of critical voice in the conversation of how to make washington work better. he and senator lott wrote a book called "crisis point" and in today's "washington post" a thoughtful story that features tom and trent talking about the opportunities in a clinton/ryan

administration for the country to start to govern again and we'll talk about what we see is the obligations and opportunities for governance around these issues. definitely a pleasure to welcome general myers here to the bipartisan policy center. he has a tremendous record of national service and courage. i think his most courageous event might have been taking over the interim presidency of kansas state university six months ago. i wonder if the pentagon prepared you for the bureaucracy of professors. the general is a four-star general, 15th chairman of the joint chiefs of staff during 2001-2005 and among his many accomplishments, he was also awarded the presidential medal of freedom. we will soon be joined by our friend chairman mike rogers, i believe his shoes are being polished as we speak and i will introduce him when he joins us. so just to kind of get the

conversation started, i thought it would be useful just to ask to you reflect a little on the broad question of, you know, why is agricultural security important, why is it a national security issue? why did they convince to you come here today and talk. about it? >> thank you for the kind words and for moderating and your leadership here, and thanks for the plug for our book. we always can boost book sales and i appreciate that as well. but general myers, thank you for your commitment and the extraordinary effort you've made in this regard and the leadership you've shown in so many security contexts. it's a real pleasure and i'm flattered to be involved with a distinguished panel this morning. i think these are issues that deserve the highest attention and the most critical prioritization as we look at public policy in the context of national security, and i don't think anyone disputes the importance of the issue, but i

don't think has happened is we've given it the kind of attention that it so justly deserves, and i must say, if i could, from a personal perspective, this is even more critical to me because of my own experience. it's 15 years ago this month that our country experienced a series of anthrax attacks. several people died. my office was the target of one of those attacks. it was a trying, very terribly difficult time for our country, and people feel very, very vulnerable, and that experience, i think, sensitized everyone to how enormously important this could be. i was majority leader at the time, and so i was right in the middle of the aftermath of that. congressman rogers has just joined us. and i was in the middle of the aftermath and i can say from

personal experience, regrettably, frankly, that there was virtually no coordination. there was a real almost conflicting set of recommendations on how to address the matter, and it was just a very alarming experience to me, to see how poorly prepared we were. well, that was 15 years ago. we've now, i think looking back over the last decade and a half, can say we've made some progress. but if you really think about it, and you look at our preparatory position today, you look at where the infrastructure is today, frankly, i think we're far off the mark with regard to where we need to be to avoid what happened 15 years ago. we're having many of the same discussions we did a decade ago, right now, and so in that 15-year period, in spite of all

of the good intentions, we've had the avian epidemic, the pandemic in 2007 and 2015. we had h1n1 in 2009. we had ebola in 2014. we had zika this year, and there's absolutely no doubt in my mind that it's just a matter of when, not if, the next natural or deliberate crisis will occur. tara o'toole, one of the most respected authorities on this issue in the country, and a friend of mine, said something that a congressional hearing earlier this year inthat i thout was really on the mark as is to often the case with things she writes and says. tara said she thought these natural events ought to be used as preparation and practice for the deliberate ones.

but the fact of the matter is, we're not ready for either, natural or deliberate. the last couple years i've been involved as jason mentioned, with the bipartisan blue ribbon panel on biodefense. it was last year we issued our first report offering 33 action items in both, in three contexts, short term, medium term and long-term approaches to how we might address this circumstance, and we addressed all the bioterror threats across the board but we drilled down on a couple including the biological threat to agriculture. and as we analyzed just what we ought to do with agriculture in particular we focussed on one idea that i think has so much merit, that is the one health concept, that we look at threats to animals and the environment and humans simultaneously and come up with a comprehensive

plan. we also said that it was so critical that we elevate the level of leadership around this whole issue much more effectively than we have in the past, and that it actually would be the responsibility of the vice president, but somebody in the west wing has to be involved here. we have to find a way to ensure that it's elevated and given the stature it truly deserves and we also felt that the importance of creating some, the wherewithal to deal with this issue and the response and the recovery period with real medical applications that just haven't been developed so far. so as i look at what kansas state has done, and so admirably providing the kind of leadership they have and the blue ribbon panel and now here at the bpc, i am encouraged that we've elevated it. i'm encouraged that there's a call for higher priority. i'm encouraged that with this new administration, whoever that

may be, a new congress, that we'll have an opportunity to build a broader context for this whole issue than we have right now. but we've got to do one thing that we failed to do for the last 15 years. we have to move from rhetoric to action. we have to find ways to put an action plan into place, and i'm hopeful we can talk about that today. >> general, before i asked you to talk about the remarkable things happening at kansas state, it's a pleasure to welcome chairman mike rogers to this discussion. mike was the representative of the eighth district of michigan from 2001 to 2005. i think most of you know he was the chairman of the house select permanent committee on intelligence. mike's been a leading voice on this issue for a number of years. he worked hard to create and fund the biomedical advanced research and development authority in the congress. he is also the closest thing to a tv celebrity we have here at the bipartisan policy center. so we look forward to hearing from you in a moment.

but general? >> jason, thank you, and senator daschle, good to be with you again. i think the last time was the middle of the night on a plane somewhere, as i recall. you'd been speaking somewhere and i was begging a ride and you were kind enough to help me out but it's good to be with you on such an important topic and congressman rogers, always good to be with you. we've been together on a couple of at least one other panel, and your insights are always much appreciated. sort of the way i'll set the stage is i think back to 9/11, and i was the acting chairman that day, actually on capitol hill getting ready for a confirmation hearing to be chairman, and i got there a little before 9:00, just after or just before the first tower was struck in new york city, and went in with senator cleland then from georgia, and second tower was struck as he's bringing up some tea. he's a tea drinker and wanted me to share some of his great tea and we called it off at that

point because we knew something was up and i think about how we thought about threats to the united states prior to 9/11, and there might have been somebody somewhere that had said well you know, the way these non-nation state actors, terrorists from other parts of the world could impact us, they could hijack commercial airplanes and run them into buildings, nobody had really thought about it. might have been somebody somewhere that thought about it but certainly hadn't risen to the level of anybody in d.c. caring much about that particular threat. as we look back, there were threats and we could have determined, but at the time people weren't concerned about that kind of threat. so that's kind of one scenario. we weren't ready for it, maybe we should have been and we to deal with the aftermath and we're still dealing with the aftermath. in 1999, actually, kansas state put out a report, a study on homeland defense, food and

safety security and emergency preparedness program. it talks about the threat to our food animals, food plants and even threats from terror, if it doesn't occur naturally, and so maybe they were ahead of themselves. i remember once i was made apair of this report when i was chairman, i thought it was really good work. but since then frankly not much has happened to change the landscape. the recommendations in the commission's report, the recommendations here and the thoughts here not many if any have been acted on in a national way that makes us any safer from these kind of threats. so 9/11 we couldn't anticipate, maybe we should have, but we couldn't anticipate or didn't anticipate. here we've had plenty of warning. we know what the possibilities are, and we know people around the globe are interested, particularly people who wish us ill. when we got into afghanistan, it was scattered quickly and some

of the sites the al qaeda were occupying, they were working to develop -- excuse me -- bioweapons targeting people and food in america, and the list included six human pathogens, six live stock and poultry pathogens and four crop pathogens. crops are often left out of this equation, kind of the last thing people think about. but the bottom line to all that is that the planning for some sort of manmade event here, terror event in the united states has opinion around for a long time. as senator daschle said, the good news is when you put in a system to deal with naturally occurring pathogen pathogens yo help with the terror piece. it's something we ought to be doing in any case. i think we have a heightened, we should have a heightened state of urgency about deterring the terror piece of it. you remember what osama bin

laden had said many times and that is their economic goal was bleeding america to the point of bankruptcy. it was said a lot, used to be classified but that was their goal, and just recently, one of the operational leaders of isis recently killed by u.s. air strike declared, and this is from daniel byman from brookings in one of his blogs, he said here's what this isis leader said. the smallest action you do in the heart of their land is dear to us than the largest action by us and more effective and more damaging to them. okay, so the beat goes on. we've been warned, and if you know anything about the current threat from al qaeda, isis, and their ilk is when they say things it's because they're think being them. it's probably because they're planning them and it's, as the senator said, it's just, it's

not if, it's when this is going to happen and then will we be prepared? other countries are working on this. russia continues to work on these kind of weapons. certainly north korea, other countries as well. and with recent technology to manipulate genomes and so forth, it's become a lot easier to develop these weapons. there's some off the shelf technology that makes this a lot easier in today's world than it has in the last decade. i would just agree with the senator. we aren't ready in this country. we aren't near ready enough. livestock examples will be handled in the second panel primarily i think and we have dr. tammy beckham, dean of our vet medicine college out at kansas state, and she's, has personal experience with animal

pat pathogenz and zoonotic diseases. i'll talk to wheat crops, not because kansas is a wheat state or south dakota is a wheat state. this is because wheat along with rice make up 40% of the caloric intake of the global population, 40% of the caloric intake to wheat. attacks on either one of them would have a deleterious effect for sure. probably didn't go noticed by many, wheat blast, which is a fungal disease exploded in bangladesh earlier this year. it can kill 100% of the crop. bangladeshis were busy burning their crops trying to eradicate it. the thought is it didn't get there intentionally. it came across the sea and across border s probably in a wn tainer of food stuffs and finally made it to the wheat

fields. that's, wheat blast is something we work on at k state. there are some solutions being tested but probably not going to be one solution that fits all cases for wheat blast. and then in afghanistan, usaid found air alkaloids mixed in with wheat flour samples, they had 150 wheat flour samples and found the alkaloids, they affect us in humans. in low doses hallucinations and in large doses they can cause neurological disease and amputati amputation. so and we know these go way back to the middle ages. we see paintings in the middle ages that show that. so a couple of examples of pathogens that can affect our crop and somebody mentioned, i don't know, jason, this $1 trillion ag economy we have in this country.

50% of our gdp. i think when people think about threats to food, animals, food, crops, they think well that's the ranchers and the farmers' problem. they're an important part of the food chain but in terms of numbers they're a very small part of the numbers involved in the food chain so when you get to 15% of gdp or thereabouts, this becomes significant for our country. and finally, i just say at kansas state, one of the fun things to see in kansas is four very large construction cranes. you don't often see them in manhattan, and there's these huge construction cranes that are helping build the national bioagra security facility there in manhattan and they're going to be pouring concrete for almost two years, and it was part of the deepest hole i'd ever seen in manhattan and now being filled up with concrete but that's where the plum island capability is moving and we're going to hopefully see that come

to fruition and then they'll start helping study some of the diseases, continue studying these diseases and coming up with ways to protect ourselves. the diseases are the zoonotic diseases that can transfer from animals to humans, so some obviously really bad stuff. again, i'll just take you back to prior to 9/11. there were some people that care a lot about this threat. 9/11 we were surprised. this has been on the table for a long time. it's been talked about. i will say that i think crops are sort of the undertalked about, under-thought about piece in this. in the end, what an adversary, a lot of extremists or terrorists want to do, they want to create in the populous distrust of their governance, and the one way you do that is create fear. can you imagine a major outbreak of any of these diseases, food,

animal, food crop diseases in the united states? there would be an element of fear. there's going to be economic impact as well. there's going to be real impact in our diets but it could create an matter how small. and it's something i think we need to be thinking about and preparing for. these are almost the perfect weapons because all the targets are relatively soft targets. there is no danger to the perpetrator. they're not going to, in most cases, be injured by what they do. it will take some time to discover it, especially with our current surveillance methods which are inadequate and then there will be no -- it will be very difficult to have attribution, who did this. i mean, in many ways they're the perfect weapon. and i'll save the rest of my time for questions. thank you. >> so mr. chairman, i expect you're now going to cheer us up

by talking a little bit about congress having very recently been part of these discussions. how do you see this issue and where do you see opportunities to improve our situation? >> well, thank you, mr. president and senator good to see you again, mr. chairman. this is a good time to bring in the drink parts because i don't know if it's going to get much better. if you look at what happened recently in syria, there was a recovery of a laptop computer by a pretty senior operative who was related to isis command and control and according to public report, the information on that computer was a bit concerning. it talked about a strategy for using biological warfare to further their aims and gains. and the reoccurring theme is that it's much easier to obtain a biological weapon than a nuclear weapon and maybe they need to refocus the way they think about use of these kinds of weapons. so all the conversations that we had and the frustration i sensed

from senator daschle, who was at the front end of this, receiving end of this, and where we are today and the lack of progress, really, we've made some -- i think some good efforts, we have 160 different therapeutics or vaccines that were developed through barda, trying to make sure we could get rid of some of the angel -- the valley of death if the development of vaccines and therapeutics. the pandemic -- both of these are bipartisan efforts but supreme lacked interest in funding the full application of what it means. so what we haven't done is married up what the threat is becoming and how we're dealing with the threat. we haven't done it. we have huge things across the

country that deal with nuclear proliferation, we have d.o.e., everybody is integrated, understanding the real threat of that weapons system in any form, either a small radiological dirty bomb up to a full-blown nuclear explosion. so we've spent a lot of time, effort, and energy getting that command-and-control, putting the intellectual capability together and then pursuing it worldwide where we find it with allies or on our own. we've done that. i think what we're all probably going to argue today is we need to do that now with with biodefense. the ebb nemy is much more sophisticated than it used to be. if you think of the recent outbreaks, ebola was studied by soviet scientists way back in the '70s as a weapon of opportunity. we saw it happen naturally in africa and our reaction to it wasn't very good. we found out we didn't have a

lot of options in reacting to it. so the only thing left was to send in the military for mobile hospital units and that created a whole bunch of problems in and of itself. thankfully there were other things that kind of happened that naturally took care of this problem. if that happened again today, i would venture to guess we're no better prepared than we were at the outbreak of ebola. we know for a fact that intelligence services and adversary scientists have worked on that as a weapons system. kansas works on wheat blast, but rice blast was a weaponized system designed to deny their enemies of food. what do you do in military planning operations? you want to go after logistics first. if i can stop you from getting beans and bullets, i win. well, that's exactly what that research was designed to do. could you deny your adversary access to food products

militarily? you extrapolate that as the general so eloquently talked about into the economics of a food chain, houston, we have a problem. all of that is real. the recent finding of that laptop computer is real. the sophistication of our adversary, even in isis, the days of the monkey bar terrorists in small camps scattered across the middle east are gone. they are much more sophisticated, they have much better capabilities, they are advertising for people who have these capabilities to join the fight. candidly, somebody is one day going to walk through the door that answers their million-dollar question. they have the right capability and the right understanding of how to process, develop, and then deliver a biological weapon. i agree with both the general and the senator, it will happen, it's a matter of now how -- are we pretard to respond to it and have we set ourselves up for

being successful in either beating it, disrupting it or reacting to it? and i think today probably not. drinks for everyone. >> i want to move into a little conversation but just a moment before i do i want to acknowledge one of the bipartisan policy centers other founders who is senator bob dole. i was with the senator a few weeks ago telling him about what we were up to and he noted there were four things he cared deeply about -- national security, agriculture, kansas, and the bullp bpc. he wrote us a lovely letter that is on the table and i encourage you to take a look at that. so let's move into what we can do about this. we understand there won't be a simple solution but clearly the nation is motivate ago lot of resources to protect ourselves generally from these kinds of threats. i guess my first question is why has biosecurity not been on that

priority list? mike, you indicated that we have a tremendous amount of architecture focused on the nuclear threat. is this just longevity? is it just we've been thinking about nuclear weapons since the '40s and this is new? or is there some reluctance to engage this? >> a little bit of both, i think. if you look at -- so we have subsets in the united states government that track even the black market movement of nuclear materials and they are exceptionally good. and over a period of years, decades, they've developed this expertise and then that's integrated back in the intelligence community and the military community. and there were real things that they could seed to work on. we knew at one time that north korea was trying to export at least components of nuclear programs to iran. we watched that happen. there were some intercepts of those materials along the way over a period of 10 to 15 years.

same with countries like bangladesh and other place, you could see these materials moving around. so it was a very real threat and it plugged into a very real architecture. that's an easy thing to get to do and it's important work. i mean, it's critically important. you don't want that material going anywhere. we just haven't had that. and so we have some really bright folks in the u.s. government who understand this threat very well. but they can't go back and plug in to this kind of an operation, this kind of an integrated established operation. and it's pretty hard to go to congress these days if we can't even get the pandemic readiness bill funded and we know we have these sproblems, the bird flu, 25% of the birds there iowa. one event. 25%. imagine if this was a targeted event. we'd be in trouble in our food system. so we don't have anything to plug into. so i think what we hope, i think, all of us are trying to say is can we create that same

kind of monitoring system and integrate it? i think we can. it is going to take a little bit of investment and it's going to take a little bit of rethinking of how we structure biodefense in that broader intelligence and military community. >> so tell us -- >> can i just add on? i think mike pretty much covered it but just to emphasize -- when you research the literature, i did a google search for threats to our agricultural infrastructure last couple days and said okay, what are people writing about out there? well, sad news is, not many people writing about anything and if they did, it's a long time ago. so it's just -- hasn't, i think, captured people like other threats that are maybe more tangible, strike the imagination in different ways. and, two, is when you look through the intelligence, it's just not one of the priorities and that -- so we have some

people that are looking that the very closely. we have a fusion center out in topeka that actually does pretty good work here. but there are not many other folks helping in that regard. we're just not gathering the intelligence and that's -- i mean, we know it's coming, right? we know this is a possibility. we know this is a possibility. and one of the ways you protect yourself is you start gathering intelligence so you can prevent it from happening and take those steps that can prevent it and we're not anywhere near that. we don't have that. if we stumble across it, that's fine, but we would have to be stumbling across it. it's not deliberate. >> so i want to start thinking a little bit about the priori prioritization of these initial steps. tom, you serve on the blue ribbon commission, which i think our other panelists are aware of and certainly the most prominent effort to really call these issues together. can you talk a little bit about the framework and what the feeling was about the top priorities? >> well, you ask