ELIZABETH ECONOMY, WELCOME TO THE SHOW.

>> THANKS, WALTER, GREAT TO BE HERE.

>> PRESIDENT TRUMP AND WESTERN EUROPEAN ALLIES ARE MEETING FOR THE G7 SUMMIT THIS WEEK.

TELL ME HOW THE IRAN DEAL IS GOING TO AFFECT THE RELATIONSHIP BETWEEN THE U. S. AND ITS G7 ALLIES AND AFFECT THE REGION?

>> IT'S GREAT NEWS, OBVIOUSLY THE U. S. AND IRAN HAVE A MEMORANDUM OF UNDERSTANDING.

THEY'RE SUPPOSED TO SIGN THE DEAL LATER THIS WEEK, FRIDAY, AND YOU KNOW, IT LEADS TO A CESSATION OF HOSTILITIES.

THERE IS A PLAN FOR LONGER-TERM NEGOTIATIONS, AROUND TWO MONTHS, THAT WILL HOPEFULLY LEAD TO A NEW AGREEMENT ON THE PART OF IRAN TO HALT ITS NUCLEAR WEAPONS PROGRAM AND OF COURSE THIS IS GOING TO OPEN BACK UP THE STRAIT OF HORMUZ.

FROM THE PERSPECTIVE OF THIS MEETING, THE G7 MEETING, HAVING PRESIDENT TRUMP ARRIVE AND BE ABLE TO ANNOUNCE THAT A DEAL HAS BEEN REACHED, IS ALL POSITIVE AND THE EUROPEANS ARE INTERESTED IN FIGURING OUT HOW THEY CAN SUPPORT THE DEAL MOVING FORWARD BEGINNING WITH I THINK WORKING TO CLEAR THE STRAIT OF HORMUZ.

I THINK IT'S GOOD TO START OFF WITH THIS DEAL AND CERTAINLY FOR THE REGION WHICH HAS BEEN BATTERED BY THIS WAR OVER THE PAST FOUR MONTHS OR SO.

THIS IS VERY WELCOME NEWS.

OF COURSE THERE ARE SKEPTICS, YOU KNOW, ABOUT THE DURABILITY OF THIS DEAL BECAUSE OF WHAT HAS HAPPENED BEFORE BUT THERE'S A STRONG COMMITMENT AT LEAST ON THE PART OF THE UNITED STATES TO TRY AND MAKE THIS STICK.

WE WILL HOLD ONTO OPTIMISM PERHAPS, UNTIL PROVED OTHERWISE.

>> HOVERING OVER THIS WEEK'S G7 SUMMIT OF COURSE IS CHINA.

WHAT ARE THE ALIGNMENTS OF EUROPE AND THE UNITED STATES WHEN IT COMES TO DEALING WITH CHINA?

>> YOU KNOW, CHINA HAS BEEN OCCUPYING A FAIRLY CENTRAL POSITION FOR ABOUT FIVE YEARS NOW.

AND THERE ARE TWO SETS OF ISSUES WHERE YOU FIND THE UNITED STATES AND THE OTHER G7 PARTNERS IN FAIRLY CLOSE ALIGNMENT, ONE IS AROUND SORT OF TRADE AND INVESTMENT WHERE ALL OF THESE COUNTRIES FACE SIMILAR CHALLENGES FROM CHINA'S ECONOMIC MODEL, AND THAT'S TRUE WHETHER WE ARE TALKING ABOUT CHINA'S ECONOMIC COALITION, SO FOR EXAMPLE, WHEN AUSTRALIA CALLED FOR INVESTIGATIONS INTO THE ORIGINS OF COVID AND CHINA STARTED TO BOYCOTT AUSTRALIAN GOODS COMING INTO CHINA, SO, THESE COUNTRIES HAVE DEVELOPED AN ANTI-COERCION PLATFORM AROUND WHICH THEY WILL WORK TOGETHER TO SUPPORT COUNTRIES WHO ARE FACING ECONOMIC COERCION FROM CHINA, CERTAINLY, WE'VE SEEN OVER THE PAST TWO OR THREE YEARS, EFFORTS ON CRITICAL MINERALS AND RARE EARTH ELEMENTS AND EFFORTS TO DEVELOP ALIGNMENT ON EXPLORING NEW SOURCES OF MINING AND REFINING OF THESE RARE EARTHS BECAUSE THERE'S TOO MUCH DEPENDENCE ON CHINA IN THIS SPACE.

SO THE ISSUE OF SUPPLY CHAIN DEPENDENCY IS ANOTHER AREA WHERE THERE IS ALIGNMENT WITHIN THE G7 AND WE'VE SEEN NEW ARRANGEMENTS EMERGE.

AND IN TERMS OF TRADE DEFENSE MEASURES, SO CHINA'S EXPORT OF ITS OVERCAPACITY, IS A SOURCE OF VERY SERIOUS CONCERN FOR ALL THE G7 MEMBERS.

SOLAR PANELS AND BATTERIES AND EV'S, AND WE WILL SEE IT ACROSS A WHOLE ARRAY OF OTHER TECHNOLOGIES AND PRODUCTS, SO, ALIGNMENT AGAIN AROUND TARIFFS, EXPORT CONTROLS, ON INVESTMENT SCREENING, SO THERE'S A LOT OF WORK TO BE DONE IN ALIGNING OUR POLICIES AROUND THESE AREAS AND SORT OF COOPERATING TOGETHER, SO NOT JUST A LINE BUT COOPERATE.

IN THE SECOND AREA WHERE THE G7 HAS SORT OF FOCUS ON CHINA HAS BEEN IN TERMS OF CHINA'S ROLE ON THE GLOBAL SECURITY FRONT, AND HERE OF COURSE, CHINA HAS BEEN, YOU KNOW, SORT OF AN ECONOMIC LIFELINE FOR RUSSIA IN RUSSIA'S WAR OF AGGRESSION AGAINST UKRAINE, AND YOU KNOW, THAT'S BEEN VERY PROBLEMATIC, AND ALSO, CHINA, SORT OF DESTABILIZING BEHAVIOR IN THE PACIFIC.

THAT'S ANOTHER AREA WHERE THE G7 HAS TAKEN NOTE AND SORT OF CALLED OUT THAT SORT OF NEGATIVE ACTION BY BEIJING, AND, FRANKLY SPEAKING, THE WHOLE SORT OF EMERGING AXIS OF CHINA, RUSSIA, NORTH KOREA AND IRAN, THAT'S SOMETHING THAT I THINK GREATLY CONCERNS THE G7.

I THINK BOTH IN TERMS OF ECONOMIC SPACE AND THE SECURITY SPACE, THERE'S GENERAL ALIGNMENT WITHIN THE G7, THAT, YOU KNOW, THEY NEED TO DEVELOP A SET OF COUNTERMEASURES TO SORT OF RESPOND TO WHAT IS A GROWING AND REALLY CHALLENGING THREAT THAT CHINA IS POSING.

>> WELL, YOU TALK ABOUT REDUCING THE DEPENDENCY ON CHINA FOR SUPPLY CHAIN, RARE EARTH MINERALS, SOMETIMES TALK ABOUT DE-RISKING, WHICH IS A RISK IF WE RELY TOO MUCH ON CHINA BUT YET IF WE PROCEED DOWN THIS PATH, DOESN'T IT MAKE IT HARDER TO KIND OF WEAN CHINA AWAY FROM ITS ALLIANCE WITH RUSSIA AND IRAN?

>> I DON'T THINK SO.

I MEAN, THERE ARE TWO SEPARATE ISSUES, YOU KNOW, CHINA DEPENDS ON IRAN AND RUSSIA, REALLY FOR NATURAL RESOURCES, AND IT ALIGNS WITH THOSE COUNTRIES ON POLITICAL GROUNDS, MORE THAN NECESSARILY ON ECONOMIC GROUNDS.

SO THE ISSUE IS SOMETHING THAT CHINA ITSELF DOES, CHINA HAS BEEN DE-RISKING ITS OWN ECONOMY .

WE'VE SEEN IT DIVERSIFY ITS SOURCES OF ENERGY, EXTREMELY SUCCESSFULLY, IN TERMS OF BOTH CLEAN ENERGY TO OIL AND GAS FROM MANY DIFFERENT SOURCES AND CHINA HAS BEEN DOING THIS, IT'S BEEN DE-RISKING ITS SUPPLY CHAIN OVER AN ARRAY OF TECHNOLOGIES.

XI JINPING, THE ARE TRYING TO CREATE FORTRESS CHINA, HE TALKS ALL THE TIME ABOUT THE NEED FOR CHINA TO HAVE INDEPENDENCE IN ITS FOOD SECURITY AND ENERGY SECURITY AND TECHNOLOGY SECURITY.

THAT HAS BEEN CHINA'S APPROACH FOR ITS OWN ECONOMY, FOR A VERY LONG PERIOD OF TIME.

SO REALLY, IT'S THE UNITED STATES AND OTHER ADVANCED DEMOCRACIES JUST PLAYING CATCH- UP, IN MANY RESPECTS TO WHAT CHINA HAS ALREADY BEEN DOING AND RECOGNIZING THE RISKS THAT COME FROM THIS OVERDEPENDENCE AND FRANKLY SPEAKING, WE DIDN'T EVEN REALIZE THIS I THINK, UNTIL COVID WHEN WE BECAME ACUTELY AWARE OF OUR DEPENDENCE ON CHINA FOR THE PERSONAL PROTECTIVE EQUIPMENT, THE MASK AND THE GLOVES AND THE VENTILATORS, THAT WE NEEDED AND THEY WERE IN SUCH SHORT SUPPLY AND WE SAW TO SOME EXTENT, CHINA WEAPONIZED THOSE THINGS THAT CHINA CAN USE THINGS LIKE THE PPE, LIKE ITS CONTROL OVER ACTIVE PHARMACEUTICAL INGREDIENTS, THE PRECURSORS THAT WE NEED FOR SO MANY DRUGS AND THE RARE EARTH AND CRITICAL MINERALS RIGHT WHEN CHINA DECIDES TO TURN OFF YOU KNOW, ITS EXPORTS, THE ENTIRE WORLD SUFFERS.

SO I THINK IT'S REALLY IMPERATIVE, FRANKLY, THAT WE BEGIN TO DEVELOP ALTERNATIVE SOURCES FOR THESE GOODS.

>> WELL LET'S TALK ABOUT THE BELTED ROAD INITIATIVE, EXACTLY HOW DOES THAT GET COUNTRIES TO ALIGN WITH CHINA AND DOES THE WEST HAVE A SUITABLE COUNTERPART?

>> SO THE INITIATIVE BEGAN AS A SORT OF HARD INFRASTRUCTURE PLAY IN 2018 AND AT THE TIME, IT WAS REALLY ABOUT CONNECTING SOME LESSER DEVELOPED CHINESE CITIES AND REGIONS TO EXTERNAL MARKETS THROUGH INFRASTRUCTURE INVESTMENTS.

SO PORTS AND RAILROADS AND HIGHWAYS.

IT'S EVOLVED TO INCLUDE YOU KNOW, THE DIGITAL SILK ROAD WHICH IS ALL ABOUT YOU KNOW, CABLES AND THE DIGITAL INFRASTRUCTURE, DATA CENTERS, E PAYMENT SYSTEMS, SATELLITE SYSTEMS.

THERE'S THE HEALTH SILK ROAD WHICH CAME TO FRUITION DURING COVID, CHINESE MEDICAL TECHNOLOGY AND THE GREEN SILK ROAD WHICH IS ABOUT THE CLEAN TECH SPACE.

DOES THE BELGIAN ROAD ENABLE CHINA TO GET COUNTRIES TO ALIGN WITH IT?

I THINK THERE'S NOT EVIDENCE REALLY FOR EXAMPLE WHERE COUNTRIES THAT RECEIVE THE MOST INVESTMENT FROM CHINA NECESSARILY ALIGN WITH CHINA ON ISSUES THAT ARE IMPORTANT TO CHINA IN THE UNITED NATIONS.

WE HAVEN'T SEEN THAT KIND OF ALIGNMENT EMERGING, AND FRANKLY SPEAKING, IN MANY COUNTRIES, THERE HAVE BEEN A LOT OF POPULAR PROTESTS AROUND BELGIAN ROAD PROJECT.

EVEN THOUGH MANY ARE WELCOMED, CERTAINLY, BY LEADERS, THERE'S A LOT OF CONSTERNATION AT THE LOCAL LEVEL, WHY?

BECAUSE CHINA HAS OFTEN EXPLOITED ITS OWN LABOR WHICH MEANS LOCAL COMMUNITIES DON'T BENEFIT.

THE SOCIAL IMPACT ASSESSMENTS , THE DEALS ARE STRUCK IN A NONTRANSPARENT WAY, SO, A LOT OF LOCAL PEOPLE MAY BELIEVE THAT THEIR LEADERS ARE POCKETING SOME SIDE MONEY AND SOMETIMES THE QUALITY OF THE PROJECTS IS NOT PARTICULARLY HIGH.

SO, EVEN THOUGH YOU KNOW, THE INFRASTRUCTURE SUPPORT IS MUCH NEEDED AND AGAIN, WELCOMED BECAUSE OFTEN TIMES WESTERN COMPANIES ARE NOT WILLING TO GO IN TO DO THIS KIND OF WORK, YOU KNOW THE PROJECTS HAVE NOT BEEN UNIFORMLY SUCCESSFUL.

ABOUT A THIRD OF THEM HAVE EITHER BEEN CANCELED OR STALLED, RUNNING INTO SIGNIFICANT DIFFICULTY.

I WAS GOING TO SAY, THAT BEING SAID, TO YOUR POINT ABOUT, DOES THE WEST OFFER A COMPARABLE YOU KNOW, SORT OF COMPETITIVE KIND OF PROJECT, NO.

AND THERE HAVE BEEN A NUMBER OF EFFORTS IN THE PAST COUPLE ADMINISTRATIONS, U. S. ADMINISTRATIONS TO DO THAT, AND I WOULD SAY NONE OF THEM HAS SUCCEEDED AND WE'VE TRIED WORKING WITH PARTNERS AND ALLIES TO DO THIS BUT IT'S VERY DIFFICULT.

AGAIN, IF YOU ARE LOOKING AT THE CHINESE PRIORITY AREAS OF MINING, DIGITAL INFRASTRUCTURE, AND CLEANTECH, THEY REALLY DOMINATE , AND YOU ARE LOOKING AT GOING INTO MINING IN PLACES WHERE WESTERN COMPANIES JUST HAVEN'T WANTED TO GO.

IT'S TOO DIFFICULT TO DO THAT BUT CHINESE COMPANIES, HEAVILY SUBSIDIZED ARE IN IT FOR THE LONG TERM AND THEY DON'T MIND THE CONDITIONS AND THEY DON'T MIND WORKING IN CHALLENGING CONDITIONS.

SO THEY HAVE A LONG-TERM STRATEGY THAT IS PAYING OFF AND WE ARE FACING THE CONSEQUENCES.

THAT BEING SAID, I THINK IT'S IMPORTANT TO RECOGNIZE THAT DESPITE ALL OF THE ATTENTION THAT BELGIAN ROAD GETS, IF YOU LOOK ACROSS THE WORLD, CHINA IS THE LARGEST SOURCE OF INVESTMENT IN NONE OF THESE REGIONS.

SO, YOU KNOW, EUROPE IS THE LARGEST INVESTOR IN AFRICA, JAPAN, IN SOUTHEAST ASIA AND THE UNITED STATES IS THE LARGEST INVESTOR IN LATIN AMERICA.

SO, ARE KINDS OF INVESTMENT ARE DIFFERENT.

WE DON'T TEND TO DO THE HIGH PROFILE INFRASTRUCTURE PROJECTS.

>> THE U. S. HAS RETREATED A LOT FROM GLOBAL LEADERSHIP.

YOU'VE TALKED ABOUT BELGIAN ROAD, WE HAVE PULLED BACK ON BOTH FOREIGN INVESTMENT BUT OBVIOUSLY USAID.

LIKEWISE, RELATIONSHIPS WITH OUR NATO ALLIES, WE'VE PULLED BACK ON THAT.

TO WHAT EXTENT DOES THAT HELP CHINA AND TO WHAT EXTENT ARE THEY SUCCESSFUL IN CAPITALIZING THAT.

>> IT'S AN IMPORTANT DISTINCTION TO MAKE, CERTAINLY THE TRUMP ADMINISTRATION HAS WITHDRAWN THE UNITED STATES FROM ITS TRADITIONAL POSITION AS, YOU KNOW, THE MOST IMPORTANT SORT OF GLOBAL PROVIDER OF PUBLIC GOODS.

WE HAVE YOU KNOW, STRESSED CERTAINLY OUR NATO ALLIES, THREATENED TO WITHDRAW FROM NATO, THREATENED TO INVADE GREENLAND.

WE HAVE TAKEN OUR POLITICAL MODEL OFF THE TABLE AS A SOURCE OF COMPETITION.

WE HAD A NON- ILLOGICAL FOREIGN POLICY, WE ARE NO LONGER PRESENTING OURSELVES AS A DEMOCRACY AND THAT NO LONGER MATTERS TO THIS PARTICULAR ADMINISTRATION, WE DON'T CONSIDER THAT A SELLING POINT ANYMORE, SO, AND AS YOU SAY, WE HAVE BASICALLY SHUTTERED USAID.

WHICH MEANS THAT WE HAVE TAKEN OURSELVES OUT OF THAT SPACE, PROVIDING AID TO SOME OF THE WORLD'S YOU KNOW, POOREST AND MOST IMPOVERISHED COUNTRIES.

IT'S A REALLY IMPORTANT SOURCE OF ASSISTANCE FOR THESE COUNTRIES AND IMPORTANT FOR U. S. SOFT POWER.

WE HAVE DEFINITELY TAKEN A STEP BACK.

I THINK OUR REPUTATION HAS SUFFERED GLOBALLY.

YOU KNOW, OUR REPUTATION IS SINKING, IT'S ALMOST SUNK WHEREAS CHINA'S, IS, YOU KNOW, RISING A LITTLE BIT, BUT THE TRUTH IS, CHINA HAS NOT BEEN ABLE TO CAPITALIZE, I THINK, VERY EFFECTIVELY, AND THE REASON BEHIND THAT, IT PROMOTES ITSELF AS A STABILIZING FORCE IN THE GLOBAL ECONOMY AND THE GLOBAL SYSTEM BUT AGAIN, COUNTRIES LOOK AT WHAT CHINA IS DOING IN TERMS OF THE EXPORT, THAT'S NOT STABILIZING FOR OTHER ECONOMIES, WHEN CHINA WEAPONIZED IS ITS CONTROL OF RARE EARTH ELEMENTS, IT'S NOT STABILIZING FOR OTHER COUNTRIES.

YOU KNOW, WHEN CHINA UNDERTAKES ITS MILITARY ASSERTIVE ACTIONS IN INDO-PACIFIC, NOT STABILIZING, SUPPORTING RUSSIA AND IRAN, NOT STABILIZING.

SO IT HASN'T UNDERTAKEN WHAT IT'S PROMISED, WHICH IS TO BE A STABILIZING FORCE IN THE GLOBAL ECONOMY AND THE GLOBAL SECURITY ARENA AND FRANKLY IT HASN'T STEPPED UP TO FILL THE VACUUM THAT'S BEEN LEFT BY THE UNITED STATES IN TERMS OF THE PROVISION OF GLOBAL AID.

INITIALLY CHINA SAID WE WILL REPLACE THE UNITED STATES FOR THIS MILLION OR $2 MILLION PROGRAM BUT IT'S MADE VERY CLEAR THAT IT IS NOT PLANNING TO REPLACE YOU KNOW, WHAT THE UNITED STATES USED TO DO WITH USAID.

CHINA'S OVERSEE DEVELOPMENT IS A TINY FRACTION IS WHAT THE UNITED STATES HAS TRADITIONALLY PROVIDED GLOBALLY?

>> WHY?

>> IT DOESN'T BELIEVE THAT IT NEEDS TO DO IT.

IT CAN WIN SIMPLY BY BEING PRESENT IF THE U. S. HAS COMPLETELY REMOVED ITSELF FROM THE GLOBAL STAGE.

BUT BECAUSE CHINA IS PER MY -- PRIMARILY A SELF-INTERESTED ACTOR.

IT HAS NEVER WANTED TO ASSUME THE BURDEN, THE GLOBAL RESPONSIBILITY THAT THE UNITED STATES HAS.

AND TO BE FAIR, WE SHOULD REMEMBER THAT IT'S PER CAPITA GDP IS ROUGHLY 13,000 U. S. DOLLARS, AND THE U. S. GDP IS OVER $80,000, SO, AT SOME LEVEL, YOU KNOW, IT'S STILL A DEVELOPING OR MIDDLE INCOME ECONOMY, SO IT DOESN'T WANT THAT BURDEN BUT IT WANTS TO FOCUS ON THE CORE INTERESTS IN ADVANCING ITS OWN INTEREST.

>> LET ME ASK THE BIG QUESTION THAT MUST BE FACING THE G-7 IN FRANCE RIGHT NOW, WHICH IS, IS IT OR SHOULD IT BE THE GOAL OF THE WEST RIGHT NOW, TO CONFRONT CHINA AND CONTAIN IT?

OR, SHOULD WE TRY TO GET BETTER RELATIONS AND MORE COOPERATION?

>> I THINK HERE, THAT THERE'S PROBABLY A GENERALLY AGREED UPON LINE THAT ROUGHLY MATCHES WHAT THE UNITED STATES HAS DONE WHICH IS TO SAY, A KIND OF TACTICAL STABILITY THAT IS AN OVERLAY AGAINST A VERY FIERCE STRATEGIC COMPETITION, SO ENABLING THE DEVELOPMENT OF CHANNELS OF COMMUNICATION SO WE HAVE THE BOARD OF TRADE, INVESTMENT, WE WANT TO CONTINUE TO WORK WITH CHINA WHERE WE CAN.

WE ARE GOING TO HAVE TALKS ON ARTIFICIAL INTELLIGENCE, WE ARE RECONSTITUTING OUR MILITARY DISCUSSIONS.

DO I THINK THAT ANY OF THESE THINGS ARE ACTUALLY GOING TO LEAD TO BIG BREAKTHROUGHS IN THE RELATIONSHIP OR MATERIALLY CHANGE THE RELATIONSHIP?

NO.

BUT IT'S IMPORTANT THAT WE KEEP TALKING AND TRYING TO FIND AREAS OF COMMON GROUND BUT FUNDAMENTALLY, WHAT YOU SEE WITH THIS ADMINISTRATION AND I THINK WHAT YOU SEE WITH EUROPE AND JAPAN, SOUTH KOREA, IS A VERY COMPETITIVE SENSE AROUND TECHNOLOGY, AROUND THE ECONOMY AND AROUND SECURITY.

AND I DON'T THINK THAT IS GOING TO CHANGE.

>> ELIZABETH ECONOMY, THANK YOU SO MUCH FOR JOINING US.

>> THANK YOU.