What’s the Deal, Mr Trump?

August 6, 2017

What’s the Deal, Mr Trump?


Transcript: Donald Trump Expounds on His Foreign Policy Views

Over two telephone conversations on Friday, Donald J. Trump, the Republican presidential candidate, discussed his views on foreign policy with Maggie Haberman and David E. Sanger of The New York Times. Here is an edited transcript of their interview (or just the highlights).

HABERMAN: I wanted to ask you about some things that you said in Washington on Monday, more recently. But you’ve talked about them a bunch. So, you have said on several occasions that you want Japan and South Korea to pay more for their own defense. You’ve been saying versions of that about Japan for 30 years. Would you object if they got their own nuclear arsenal, given the threat that they face from North Korea and China?

TRUMP: Well, you know, at some point, there is going to be a point at which we just can’t do this anymore.

But right now we’re protecting, we’re basically protecting Japan, and we are, every time North Korea raises its head, you know, we get calls from Japan and we get calls from everybody else, and “Do something.” And there’ll be a point at which we’re just not going to be able to do it anymore. Now, does that mean nuclear? It could mean nuclear. It’s a very scary nuclear world.

Biggest problem, to me, in the world, is nuclear, and proliferation. At the same time, you know, we’re a country that doesn’t have money. You know, when we did these deals, we were a rich country. We’re not a rich country. We were a rich country with a very strong military and tremendous capability in so many ways. We’re not anymore. We have a military that’s severely depleted. We have nuclear arsenals which are in very terrible shape. They don’t even know if they work.

We’re not the same country, Maggie and David, I mean, I think you would both agree.

SANGER: So, just to follow Maggie’s thought there, though, the Japanese view has always been, if the United States, at any point, felt as if it was uncomfortable defending them, there has always been a segment of Japanese society, and of Korean society that said, “Well, maybe we should have our own nuclear deterrent, because if the U.S. isn’t certain, we need to make sure the North Koreans know that.” Is that a reasonable position. Do you think at some point they should have their own arsenal?

TRUMP: Well, it’s a position that we have to talk about, and it’s a position that at some point is something that we have to talk about, and if the United States keeps on its path, its current path of weakness, they’re going to want to have that anyway with or without me discussing it, because I don’t think they feel very secure in what’s going on with our country, David. You know, if you look at how we backed our enemies, it hasn’t – how we backed our allies – it hasn’t exactly been strong. When you look at various places throughout the world, it hasn’t been very strong. And I just don’t think we’re viewed the same way that we were 20 or 25 years ago, or 30 years ago. And, you know, I think it’s a problem. You know, something like that, unless we get very strong, very powerful and very rich, quickly, I’m sure those things are being discussed over there anyway without our discussion.

HABERMAN: Will you –

SANGER: And would you have an objection to it?

TRUMP: Um, at some point, we cannot be the policeman of the world. And unfortunately, we have a nuclear world now. And you have, Pakistan has them. You have, probably, North Korea has them. I mean, they don’t have delivery yet, but you know, probably, I mean to me, that’s a big problem. And, would I rather have North Korea have them with Japan sitting there having them also? You may very well be better off if that’s the case. In other words, where Japan is defending itself against North Korea, which is a real problem. You very well may have a better case right there. We certainly haven’t been able to do much with him and with North Korea. But you may very well have a better case. You know, one of the things with the, with our Japanese relationship, and I’m a big fan of Japan, by the way. I have many, many friends there. I do business with Japan. But, that, if we are attacked, they don’t have to do anything. If they’re attacked, we have to go out with full force. You understand.

That’s a pretty one-sided agreement, right there. In other words, if we’re attacked, they do not have to come to our defense, if they’re attacked, we have to come totally to their defense. And that is a, that’s a real problem.

Nuclear Weapons, Cyberwarfare and Spying on Allies

HABERMAN: Would you, you were just talking about the nuclear world we live in, and you’ve said many times, and I’ve heard you say it throughout the campaign, that you want the U.S. to be more unpredictable. Would you be willing to have the U.S. be the first to use nuclear weapons in a confrontation with adversaries?

TRUMP: An absolute last step. I think it’s the biggest, I personally think it’s the biggest problem the world has, nuclear capability. I think it’s the single biggest problem. When people talk global warming, I say the global warming that we have to be careful of is the nuclear global warming. Single biggest problem that the world has. Power of weaponry today is beyond anything ever thought of, or even, you know, it’s unthinkable, the power. You look at Hiroshima and you can multiply that times many, many times, is what you have today. And to me, it’s the single biggest, it’s the single biggest problem.

SANGER: You know, we have an alternative these days in a growing cyber arsenal. You’ve seen the growing cyber command and so forth. Could you give us a vision of whether or not you think that the United States should regularly be using cyber weapons, perhaps, as an alternative to nuclear? And if so, how would you either threaten or employ those?

TRUMP: I don’t see it as an alternative to nuclear in terms of, in terms of ultimate power. Look, in the perfect world everybody would agree that nuclear would, you know, be so destructive, and this was always the theory, or was certainly the theory of many. That the power is so enormous that nobody would ever use them. But, as you know, we’re dealing with people in the world today that would use them, O.K.? Possibly numerous people that use them, and use them without hesitation if they had them. And there’s nothing, there’s nothing as, there’s nothing as meaningful or as powerful as that, and you know the problem is, and it used to be, and you would hear this, David, and I would hear it, and everybody would hear it, and — I’m not sure I believed it, ever. I talk sometimes about my uncle from M.I.T., and he would tell me many years ago when he was up at M.I.T. as a, he was a professor, he was a great guy in many respects, but a very brilliant guy, and he would tell me many years ago about the power of weapons someday, that the destructive force of these weapons would be so massive, that it’s going to be a scary world. And, you know, we have been under the impression that, well we’ve been, I think it’s misguided somewhat, I’ve always felt this but that nobody would ever use them because of the power. And the first one to use them, I think that would be a very bad thing. And I will tell you, I would very much not want to be the first one to use them, that I can say.


SANGER: The question was about cyber, how would you envision using cyber weapons? Cyber weapons in an attack to take out a power grid in a city, so forth.

TRUMP: First off, we’re so obsolete in cyber. We’re the ones that sort of were very much involved with the creation, but we’re so obsolete, we just seem to be toyed with by so many different countries, already. And we don’t know who’s doing what. We don’t know who’s got the power, who’s got that capability, some people say it’s China, some people say it’s Russia. But certainly cyber has to be a, you know, certainly cyber has to be in our thought process, very strongly in our thought process. Inconceivable that, inconceivable the power of cyber. But as you say, you can take out, you can take out, you can make countries non functioning with a strong use of cyber. I don’t think we’re there.

I don’t think we’re as advanced as other countries are, and I think you probably would agree with that. I don’t think we’re advanced, I think we’re going backwards in so many different ways. I think we’re going backwards with our military. I certainly don’t think we are, we move forward with cyber, but other countries are moving forward at a much more rapid pace. We are frankly not being led very well in terms of the protection of this country.

HABERMAN: Mr. Trump, just a quick follow-up on that question. As you know, we discovered in recent years that the U.S. spies extensively against its allies. That’s what came up with Edward Snowden and his data trove including Israel and Germany.

TRUMP: Edward Snowden has caused us tremendous problems.

HABERMAN: But would you continue the programs that are in place now, or would you halt them, in terms of spying against our allies?

SANGER: Like Israel and Germany.

TRUMP: Right. They’re spying against us. Edward Snowden has caused us tremendous problems. Edward Snowden has been, you know, you have the two views on Snowden, obviously: You have, he’s wonderful, and you have he’s horrible. I’m in the horrible category. He’s caused us tremendous problems with trust, with everything about, you know, when they’re showing, Merkel’s cellphone has been spied on, and are – Now, they’re doing it to us, and other countries certainly are doing it to us, and but what I think what he did, I think it was a tremendous, a tremendous disservice to the United States. I think and I think it’s amazing that we can’t get him back.

SANGER: President Obama ordered an end to the spying, to the listening in on Angela Merkel’s cellphone, if that’s in fact what we were doing. Was that the right decision?

“We will not be ripped off anymore. We’re going to be friendly with everybody, but we’re not going to be taken advantage of by anybody.”

TRUMP: Well you see, I don’t know that, you know, when I talk about unpredictability, I’m not sure that we should be talking about me – On the assumption that I’m doing well, which I am, and that I may be in that position, I’m not sure that I would want to be talking about that. You understand what I mean by that, David. We’re so open, we’re so, “Oh I wouldn’t do this, I wouldn’t do that, I would do this, I would do that.” And it’s not so much with Merkel, but it’s certainly with other countries. You know, that really, where there’s, where there’s a different kind of relationship, and a much worse relationship than with Germany. So, you know there’s so, there’s such predictability with our country. We go and we send 50 soldiers over to the Middle East and President Obama gets up and announces that we’re sending 50 soldiers to the Middle East. Fifty very special soldiers. And they now have a target on their back, and everything we do, we announce, instead of winning, and announcing when it’s all over.

There’s such, total predictability of this country, and it’s one of the reasons we do so poorly. You know, I’d rather not say that. I would like to see what they’re doing. Because you know, many countries, I can’t say Germany, but many countries are spying on us. I think that was a great disservice done by Edward Snowden. That I can tell you.

How to Defeat ISIS

HABERMAN: Mr. Trump, you have talked about your plans to defeat ISIS, and how you would approach it. Would you be willing to stop buying oil from the Saudis if they’re unwilling to go in and help?

SANGER: On the ground?

TRUMP: Oh yeah, sure. I would do that. The beautiful thing about oil is that, you know, we’re really getting close, because of fracking, and because of new technology, we’re really in a position that we weren’t in, you know, years ago, and the reason we’re in the Middle East is for oil. And all of a sudden we’re finding out that there’s less reason to be. Now, now, we’re in the Middle East for really defense, because we can’t allow them, I mean, look, I was against the war in Iraq. I thought it would destabilize the Middle East, and it has destabilized it, it’s totally destabilized the Middle East. The way Obama got out of the war was, you know, disgraceful, and idiotic. When he announced the date certain, they pulled back, and they said, “Oh, well.” As much as they don’t mind dying, they do mind dying. And they pulled back, and then, you know, it’s a, it was a terrible thing the way he announced that, and then he didn’t leave troops behind so that, you know, whatever there was of Iraq, which in my opinion wasn’t very much, because I think that, you know, the government was totally corrupt, and they put the wrong people in charge, and you know, that in its own way led to the formation of ISIS, because they weren’t given their due. But, I think that President Obama, the way he got out of that war was unbelievable. I think Hillary Clinton was catastrophic in those decisions, having to do with Libya and just about everything else. Every bad decision that you could make in the Middle East was made. And now if you look at it, if you would go back 15 years ago, and I’m not saying it was only Obama, It was Obama’s getting out, it was other people’s getting in, but you go back 15 years ago, and I say this, if our presidents would have just gone to the beach and enjoyed the ocean and the sun, we would’ve been much better off in the Middle East, than all of this tremendous death, destruction, and you know, monetary loss, it’s just incredible. ’Cause we’re further, we’re far worse off today than we were 15 years ago or 10 years ago in the Middle East. Far worse.

SANGER: But I just want to make sure I understand your answer to Maggie’s question. So you said earlier this week that we should use air power but not send in ground forces. That had to be done by the regional Arab partners. We assume by that, you mean the Saudis, the U.A.E. and others from whom we might purchase oil or have alliances. I think Maggie’s question, if I understood it right, was if these countries are unwilling to send in ground troops against ISIS, and so far they have been, despite President Obama’s efforts to get them in, would you be willing to say, “We will stop buying oil from you, until you send ground troops?”

TRUMP: There’s two answers to that. The answer is, probably yes, but I would also say this: We are not being reimbursed for our protection of many of the countries that you’ll be talking about, that, including Saudi Arabia. You know, Saudi Arabia, for a period of time, now the oil has gone down, but still the numbers are phenomenal, and the amount of money they have is phenomenal. But we protect countries, and take tremendous monetary hits on protecting countries. That would include Saudi Arabia, but it would include many other countries, as you know. We have, there’s a whole big list of them. We lose, everywhere. We lose monetarily, everywhere. And yet, without us, Saudi Arabia wouldn’t exist for very long.

It would be, you know, a catastrophic failure without our protection. And I’m trying to figure out, why is it that we aren’t going in and saying, at a minimum, at a minimum it’s a two-part question, with respect to Maggie’s question. But why aren’t we going in and saying, “At a minimum, I’m sorry folks, but you have to, under no circumstances can we continue to do this.” You know, we needed, we needed oil desperately years ago.

Today, because – again, because of the new technologies, and because of places that we never thought had oil, and they do have oil, and there’s a glut on the market, there’s a tremendous glut on the market, I mean you have ships out at sea that are loaded up and they don’t even know where to go dump it. But we don’t have that same pressure anymore, at all. And we shouldn’t have that for a long period of time, because there’s so many places. I mean, they’re closing wells all over the place.

So, I would say this, I would say at a minimum, we have to be reimbursed, substantially reimbursed, I mean, to a point that’s far greater than what we’re being paid right now. Because we’re not being reimbursed for the kind of tremendous service that we’re performing by protecting various countries. Now Saudi Arabia’s one of them.

I think if Saudi Arabia was without the cloak of American protection of our country’s, of U.S. protection, think of Saudi Arabia. I don’t think it would be around. It would be, whether it was internal or external, it wouldn’t be around for very long. And they’re a money machine, they’re a monetary machine, and yet they don’t reimburse us the way we should be reimbursed. So that’s a real problem. And frankly, I think it’s a real, in terms of bringing our country back, because our country’s a poor country. Our country is a debtor nation, we’re a debtor nation. I mean, we owe trillions of dollars to people that are buying our bonds, in the form of other countries. You look at China, where we owe them $1.7 trillion, you have Japan, $1.5 trillion. We’re a debtor nation. We can’t be a debtor nation. I don’t want to be a debtor nation. I want it to be the other way.

One of the reasons we’re a debtor nation, we spend so much on the military, but the military isn’t for us. The military is to be policeman for other countries. And to watch over other countries. And there comes a point that, and many of these countries are tremendously rich countries. Not powerful countries, but – in some cases they are powerful – but rich countries.

SANGER: One more along the lines of your ISIS strategy. You’ve seen the current strategy, which is, you’ve seen Secretary Kerry trying to seek a political accord between President Assad and the rebel forces, with Assad eventually leaving. And then the hope is to turn all those forces, including Russia and Iran, against ISIS. Is that the right way to do it? Do you have an alternative approach?

TRUMP: Well, I thought the approach of fighting Assad and ISIS simultaneously was madness, and idiocy. They’re fighting each other and yet we’re fighting both of them. You know, we were fighting both of them. I think that our far bigger problem than Assad is ISIS, I’ve always felt that. Assad is, you know I’m not saying Assad is a good man, ’cause he’s not, but our far greater problem is not Assad, it’s ISIS.

SANGER: I think President Obama would agree with that.

TRUMP: O.K., well, that’s good. But at the same time – yeah, he would agree with that, I think to an extent. But I think, you can’t be fighting two people that are fighting each other, and fighting them together. You have to pick one or the other. And you have to go at –

SANGER: So how would your strategy differ from what he’s doing right now?

TRUMP: Well I can only tell you – I can’t tell you, because his strategy, it’s open and it would seem to be fighting ISIS but he’s fighting it in such a limited capacity. I’ve been saying, take the oil. I’ve been saying it for years. Take the oil. They still haven’t taken the oil. They still haven’t taken it. And they hardly hit the oil. They hardly make a dent in the oil.

SANGER: The oil that ISIS is pumping.

TRUMP: Yes, the oil that ISIS is pumping, where they’re getting tremendous amounts of revenue. I’ve said, hit the banking channels. You know, they have very sophisticated banking channels, which I understand, but I don’t think a lot of people do understand. You know, they’re taking in tremendous amounts of money from banking channels. That, you know, many people in countries that you think are our allies, are giving ISIS tremendous amounts of money and it’s going through very dark banking channels. And we should have stopped those banking channels long ago and I think we’ve done nothing to stop them, and that money is massive. Massive. It’s a massive amount of money. So it’s not only from oil, David, it’s from also the bank, the bank. It’s through banks. And very sophisticated channels. They call them the dark channels. Very sophisticated channels. And money is coming in from people that we think are our allies.

‘NATO Is Obsolete’

HABERMAN: Mr. Trump, I also want to go back to something you said earlier this week about NATO being ineffective. Do you think it’s the right institution for countering terror or do we need a new one and what might that new one look like?

TRUMP: Well I said something a few days ago and I was vastly criticized and I notice now this morning, people are saying Donald Trump is a genius.

Because what I said – which of course is always nice to hear, David. But I was asked a question about NATO, and I’ve thought this but I have never expressed my opinion because until recently I’ve been an entrepreneur, I’ve been a very successful entrepreneur as opposed to a politician. And – I’d love to ask David, Maggie, if he’s a little surprised at how well I’ve done. You know, we’ve knocked out a lot. We’re down to the leftovers now, from the way I look at it. I call them the leftovers.


So anyway, but the question was asked of me a few days ago about NATO, and I said, well, I have two problems with NATO. No. 1, it’s obsolete. When NATO was formed many decades ago we were a different country. There was a different threat. Soviet Union was, the Soviet Union, not Russia, which was much bigger than Russia, as you know. And, it was certainly much more powerful than even today’s Russia, although again you go back into the weaponry. But, but – I said, I think NATO is obsolete, and I think that – because I don’t think – right now we don’t have somebody looking at terror, and we should be looking at terror. And you may want to add and subtract from NATO in terms of countries. But we have to be looking at terror, because terror today is the big threat. Terror from all different parts. You know in the old days you’d have uniforms and you’d go to war and you’d see who your enemy was, and today we have no idea who the enemy is.

SANGER: If you just think about Maggie’s question about whether it’s the right institution for this, when you go to NATO these days, in Brussels, not far from where we’ve seen — just miles from where we saw the attacks the other day —

TRUMP: Which is amazing, right? Which is amazing in itself. Yes?

SANGER: What they’ll say to you is that Russia is resurgent right now. They are rebuilding their nuclear arsenal. They’re [unintelligible] Baltics. We’ve got submarine runs, air runs. Things that have at least echoes of the old Cold War. The view is that their mission is coming back. Do you agree with that?

TRUMP: I’ll tell you the problems I have with NATO. No. 1, we pay far too much. We are spending — you know, in fact, they’re even making it so the percentages are greater. NATO is unfair, economically, to us, to the United States. Because it really helps them more so than the United States, and we pay a disproportionate share. Now, I’m a person that — you notice I talk about economics quite a bit, in these military situations, because it is about economics, because we don’t have money anymore because we’ve been taking care of so many people in so many different forms that we don’t have money — and countries, and countries. So NATO is something that at the time was excellent. Today, it has to be changed. It has to be changed to include terror. It has to be changed from the standpoint of cost because the United States bears far too much of the cost of NATO.

And one of the things that I hated seeing is Ukraine. Now I’m all for Ukraine, I have friends that live in Ukraine, but it didn’t seem to me, when the Ukrainian problem arose, you know, not so long ago, and we were, and Russia was getting very confrontational, it didn’t seem to me like anyone else cared other than us. And we are the least affected by what happens with Ukraine because we’re the farthest away. But even their neighbors didn’t seem to be talking about it.

And, you know, you look at Germany, you look at other countries, and they didn’t seem to be very much involved. It was all about us and Russia. And I wondered, why is it that countries that are bordering the Ukraine and near the Ukraine – why is it that they’re not more involved? Why is it that they are not more involved? Why is it always the United States that gets right in the middle of things, with something that – you know, it affects us, but not nearly as much as it affects other countries. And then I say, and on top of everything else – and I think you understand that, David – because, if you look back, and if you study your reports and everybody else’s reports, how often do you see other countries saying ‘We must stop, we must stop.” They don’t do it! And, in fact, with the gas, you know, they wanted the oil, they wanted other things from Russia, and they were just keeping their mouths shut. And here the United States was going out and, you know, being fairly tough on the Ukraine. And I said to myself, isn’t that interesting? We’re fighting for the Ukraine, but nobody else is fighting for the Ukraine other than the Ukraine itself, of course, and I said, it doesn’t seem fair and it doesn’t seem logical.

HABERMAN: Mr. Trump, speaking of –

TRUMP: David, does that make sense to you, by the way?

SANGER: Well, President Obama said the other day in an interview he had that he thought that Russia, over time, was always going to have more influence over Ukraine than we would or anyone else would just given both the history and the geography.

TRUMP: And the location, right. The geography. I would agree with him.

SANGER: And so in the end do you agree that Russia is going to end up dominating the Ukraine?

TRUMP: Well, unless, unless there is, you know, somewhat of a resurgence frankly from people that are around it. Or they would ask us for help. But they don’t ask us for help. They’re not even asking us for help. They’re literally not even talking about it, and these are the countries that border the Ukraine.

HABERMAN: Mr. Trump –

TRUMP: There doesn’t seem to be any great anxiety over the Ukraine by everybody that should be affected and that’s bordering the Ukraine.

SANGER: There are several countries that have joined NATO in recent times – Estonia, among them, and so forth – that we are now bound by treaty to defend if Russia moved in. Would you observe that part of the treaty?

TRUMP: Yeah, I would. It’s a treaty, it’s there. I mean, we defend everybody. (Laughs.) We defend everybody. No matter who it is, we defend everybody. We’re defending the world. But we owe, soon, it’s soon to be $21 trillion. You know, it’s 19 now but it’s soon to be 21 trillion. But we defend everybody. When in doubt, come to the United States. We’ll defend you. In some cases free of charge. And in all cases for a substantially, you know, greater amount. We spend a substantially greater amount than what the people are paying. We, we have to think also in terms – we have to think about the world, but we also have

I mean look at what China’s doing in the South China Sea. I mean they are totally disregarding our country and yet we have made China a rich country because of our bad trade deals. Our trade deals are so bad. And we have made them – we have rebuilt China and yet they will go in the South China Sea and build a military fortress the likes of which perhaps the world has not seen. Amazing, actually. They do that, and they do that at will because they have no respect for our president and they have no respect for our country. Hey folks, I’m going to have to get off here now. Did you –

Tensions in the South China Sea

HABERMAN: I just had one quick follow-up on what you were saying about the South China Sea. How would you counter that assertiveness over those islands? Among other things, it’s increasingly valuable real estate strategically. Would you be willing to build our own islands there?

TRUMP: Well what you have to do – and you have to speak to Japan and other countries, because they’re affected far greater than we are – you understand that – I mean, they’re affected far – I just think the act is so brazen, and it’s so terrible that they would do that without any consultation, without anything, and yet they’ll sell their products to the United States and rebuild China, and frankly, even the islands, I mean, you know, they’ve made so much economic progress because of the United States. And in the meantime we’re becoming a third-world nation. You look at our airports, you look at our roadways, you look at our bridges are falling down. They’re building bridges all over the place, ours are falling down. You know, we’ve rebuilt China. The money they’ve drained out of the United States has rebuilt China. And they’ve done it through monetary manipulation, by devaluations. And very sophisticated. I mean, they’re grand chess players at devaluation. But they’ve done it.

SANGER: I think what Maggie was asking was how would you deter their activity. Right now (Crosstalk) – But would you claim some of those reef scenarios to try to build our own military –

TRUMP: Perhaps, but we have great economic – and people don’t understand this – but we have tremendous economic power over China. We have tremendous power. And that’s the power of trade. Because they use us as their bank, as their piggy bank, they take – but they don’t have to pay us back. It’s better than a bank because they take money out but then they don’t have to pay us back.

SANGER: So you would cut into trade in return –

TRUMP: No, I would use trade to negotiate.

HABERMAN: Oh, O.K. My last question. Sir, my last –

TRUMP: I would use trade to negotiate. Would I go to war? Look, let me just tell you. There’s a question I wouldn’t want to answer. Because I don’t want to say I won’t or I will or – do you understand that, David? That’s the problem with our country. A politician would say, ‘Oh I would never go to war,’ or they’d say, ‘Oh I would go to war.’

I don’t want to say what I’d do because, again, we need unpredictability. You know, if I win, I don’t want to be in a position where I’ve said I would or I wouldn’t. I don’t want them to know what I’m thinking. The problem we have is that, maybe because it’s a democracy and maybe because we have to be so open – maybe because you have to say what you have to say in order to get elected – who knows? But I wouldn’t want to say. I wouldn’t want them to know what my real thinking is. But I will tell you this. This is the one aspect I can tell you. I would use trade, absolutely, as a bargaining chip.

His Foreign Policy Team

HABERMAN: Mr. Trump, how did you come to settle on your foreign policy team? I know that it’s still in formation and you’ve said –

TRUMP: Recommended by people. And we’re going to have new people put in. In fact, we have additional people too. You’ve got the one list, I think, but we have – we actually have – I only gave certain names.

HABERMAN: But did you meet with them?

TRUMP: We have some others that I really like a lot and we’re going to put them in. Maj. Gen. Gary Harrell. Maj. Gen. Bert Mizuwawa. (Ed. note: It’s Mizusawa.)

HABERMAN: These are the additional ones?

TRUMP: Rear Adm. Chuck Kubic. Yeah. He’s Navy, retired. Very good, nice, supposedly.

HABERMAN: Interesting. Interesting.

TRUMP: These are people recommended – people that I respect recommended them. People – I’ve heard very good things about them. In addition, we’re going to be adding some additional names that I’ve liked over the years.


TRUMP: I have very strong – as you’ve probably noticed. I’ve had very strong feelings on foreign policy and I’ve had very strong feelings on defense and offense. And I’ve been right about a lot of the things I’ve been saying. I’ve been right about a lot. And The New York Times criticized me very badly with a very major article when I said Brussels is a hellhole, and I talked about Brussels in a very negative way because of what they’re doing over there. And yesterday all over Twitter, as you probably saw, everybody said that Trump is right, The New York Times – You know, The New York Times really hit me hard on Brussels when I said recently that it’s a hellhole, and waiting to explode. And I didn’t even realize it, and then yesterday all over the place, Twitter was crazy that Trump was right, again, this time about Brussels.

HABERMAN: You mean after the attacks?

TRUMP: I’ve been right – Yeah, after the attack. I’ve been right about a lot of different things. So. Anyway. You know, in my book I mention Osama bin Laden, and I wrote the book in 2000, prior to the World Trade Center coming down and the reason I did is that I saw this guy and I read about this terrorist who was a very aggressive, bad dude. And I wrote about it in “The America We Deserve.” I wrote about Osama bin Laden. You know, not a lot, but a couple paragraphs – about Osama bin Laden. Look at him. You better take a look at him. And a year and a half later the World Trade Center came down. And your friend Joe Scarborough, interestingly, in one of his – you know, somebody had mentioned that, and Joe said, ‘No way. There’s no way he wrote about it before the fact.’ And they said no, no, and they sent out for the book, and they put it before him and he said, ‘Wow, you’re right. Trump wrote about Osama bin Laden before the World Trade Center came down. That’s amazing.’So look, I’ve said a lot. I don’t get a lot of credit. I do from the people. I don’t from a lot of the media. But that’s O.K. I’d rather keep it that way. Hey David, I’d rather have it that way, I guess, right?


The Iran Deal

SANGER: You have told us a lot about what your leverage would be over China in trade. Tell us on Iran: I know that you’ve said that you think that the Iran deal was an extremely bad deal. I’d be interested to know what your goals would be in renegotiating it. What your leverage would be and what you would renegotiate, what parts of the agreement.

TRUMP: Sure. It’s not just that it’s a bad deal, David. It’s a deal that could’ve been so much better just if they’d walked a couple of times. They negotiated so badly. They were being mocked, they were being scorned, they were being harassed, our negotiators, including Kerry, back in Iran, by the various representatives and the leaders of Iran at the highest level. And they never walked. They should’ve walked, doubled up the sanctions, and made a good deal. Gotten the prisoners out long before, not just after they gave the $150 billion. They should’ve never given the money back. There were so many things that were done, they were so, the negotiation was, and I think deals are fine, I think they’re good, not bad. But, you gotta make good deals, not bad deals. This deal was a disaster.

SANGER: So, it’s a deal you would inherit if you were elected, so what I’m trying to get at is, what would you insist on. Are the restrictions on nuclear not long enough, are the missile restrictions not strong enough?

TRUMP: Certainly the deal is not long enough. Because at the end of the deal they’re going to have great nuclear capability. So certainly the deal isn’t long enough. I would never have given them back the $150 billion under any circumstances. I would’ve never allowed that to happen. They are, they are now rich, and did you notice they’re buying from everybody but the United States? They’re buying planes, they’re buying everything, they’re buying from everybody but the United States. I would never have made the deal.

SANGER: Our law prevents us from selling to them, sir.

TRUMP: Uh, excuse me

SANGER: Our law prevents us from selling any planes or, we still have sanctions in the U.S. that would prevent the U.S. from being able to sell that equipment.

TRUMP: So, how stupid is that? We give them the money, and we now say, “Go buy Airbus instead of Boeing,” right? So how stupid is that? In itself, what you just said, which is correct by the way, but would they now go and buy, you know, they bought 118 approximately, 118 Airbus planes. They didn’t buy Boeing planes, O.K.? We give them the money, and we say you can’t spend it in the United States, and create wealth and jobs in the United States. And on top of it, they didn’t, they in theory, I guess, cannot do that, you know, based on what I’ve understood. They can’t do that. It’s hard to believe. We gave them $150 billion and they can’t spend it in our country.

SANGER: So you would lift the domestic sanctions so they could buy American goods?

TRUMP: Well, I wouldn’t have given them back the money. So I wouldn’t be in that position. I would never have given them back the – that would never be a part of the negotiation. I would have never, ever given it to them, and I would’ve made a better deal than they made, without the money, and I would’ve made a better deal.

SANGER: And to stop the missile launches they’ve been doing?

TRUMP: Well, it’s ridiculous, I mean, now they’re doing missile launches, and they’re buying missiles from Russia, and they’re doing things that nobody thought were, you know, even permissible or in the deal, and they’re doing them.

HABERMAN: Mr. Trump, one thing you didn’t talk about –

TRUMP: That deal was one of the most incompetent deals of any kind I’ve ever seen.

HABERMAN: One thing you talked about at Aipac –

TRUMP: Right, David, so I wouldn’t talk in terms of not buying because I would’ve never, ever given them the money. Go ahead.

HABERMAN: Sorry, sir, one thing that didn’t come up at Aipac, I think in actually anyone’s speeches, but in yours also, I’m curious, in terms of Israel, and in terms of the peace process, do you think it should result in a two-state solution, or in a single state?

“I wouldn’t want them to know what my real thinking is.”

DONALD J. TRUMP, who told us his thinking on foreign policy — up to a point.

Read the highlights.

TRUMP: Well, I think a lot of people are saying it’s going to result in a two-state solution. What I would love to do is to, a lot of people are saying that. I’m not saying anything. What I’m going to do is, you know, I specifically don’t want to address the issue because I would love to see if a deal could be made. If a deal could be made. Now, I’m not sure it can be made, there’s such unbelievable hatred, there’s such, it’s ingrained, it’s in the blood, the hatred and the distrust, and the horror. But I would love to see if a real deal could be made. Not a deal that you know, lasts for three months, and then everybody starts shooting again. And a big part of that deal, you know, has to be to end terror, we have to end terror. But I would say this, in order to negotiate a deal, I’d want to go in there as evenly as possible and we’ll see if we can negotiate a deal. But I would absolutely give that a very hard try to do. You know, a lot of people think that’s the hardest of all deals to negotiate. A lot of people think that. So, but I would say that I would have a better chance than anybody of making a deal. I’ll tell you one thing, people that I know from Israel, many people, many, many people, and almost everybody would love to see a deal on the side of Israel. Everybody would, now with that being said, most people don’t think a deal can be made. But from the Israeli side, they would love to see a deal. And I’ve been a little bit surprised here. Now that I’m really into it, I’ve been a little bit surprised to hear that. I would’ve said, I would’ve said that maybe, maybe you know, maybe Israel never really wanted to make a deal or doesn’t really want to make a deal. They really want to make a deal, they want to make a good deal, they want to make a fair deal, but they do want to make a deal. And, almost everybody, and I’m talking to people off the record, and off the record, they really would like to see a deal. I’m not so sure that the other side can mentally, you know, get their heads around the deal, because the hatred is so incredible. Folks, I have to go.

Developing Views on Foreign Affairs

Second interview begins:

TRUMP: So go ahead, start off wherever you want.

SANGER: One place that might be a good place to start is where we ended up on the foreign policy advisers. Because we’re trying to figure out how much time you’re cutting out now for foreign policy as you said — it’s not an area you focused on in your business career as much.

TRUMP: Well I enjoyed it, I enjoyed reading about it. But it wasn’t something that came into play as a business person. But I had an aptitude for it I think, and I enjoyed reading about and I would read about it.

SANGER: One question we had for you is, first of all, since you enjoyed reading about it, is there any particular book or set of articles that you found influential in developing your own foreign policy views?

TRUMP: More than anything else would be various newspapers including your own, you really get a vast array and, you know a big menu of different people and different ideas. You know you get a very big array of things from reading the media, from seeing the media, the papers, including yours. And it’s something that I’ve always found interesting and I think I’ve adapted to it pretty well. I will tell you my whole stance on NATO, David, has been — I just got back and I’m watching television and that’s all they’re talking about. And you know when I first said it, they sort of were scoffing. And now they’re really saying, well wait, do you know it’s really right? And maybe NATO — you know, it doesn’t talk about terror. Terror is a big thing right now. That wasn’t the big thing when it originated and people are starting to talk about the cost.

SANGER: Well it’s geared toward state actors and you’re discussing gearing something toward non-state actors. Is it possible that we need a new institution that is not burdened by the military structure of NATO in order to deal with non-state actors and terrorists?

TRUMP: I actually think in terms of terror you may be better off with a new institution, an institution that would be more fairly based, an institution that would be more fairly taken care of from an economic standpoint. You have many wealthy states over there that are not going to be there if it’s not for us, and they’re not going to be there if it is for terror. Whether it’s Saudi Arabia or others. I actually do think, while I’d like to adapt it, I think you have a different set of players, frankly. You have more of a Middle Eastern player and others but you would have in addition, Middle Eastern players.

SANGER: Who are not currently members of NATO. You think the membership of NATO is not set up right for combating terror.

TRUMP: No, it was set up to talk about the Soviet Union. Now of course the Soviet Union doesn’t exist now it’s Russia, which is not the same size, in theory not the same power, but who knows about that because of weaponry, but it’s not the same size and this was set up for numerous things but for the Soviet Union. The point is the world is a much different place right now. And today all you have to do is read and see the world is, the big threat would seem to be based on terror and based on what’s going on in 90 percent, 95 percent of the horror stories. I think, probably a new institution maybe would be better for that than using NATO which was not meant for that. And it’s become very bureaucratic, extremely expensive and maybe is not flexible enough to go after terror. Terror is very much different than what NATO was set up for.

SANGER: And requires a different kind of force.

TRUMP: I think it requires a different flexibility, it requires a different speed maybe, watching nations or a nation or nations. I think it requires flexibility and speed.

SANGER: So Maggie and I were at the end of our conversation this morning we were talking with you a little bit about your foreign policy advisers. There’s been a little bit of a sense that you’ve had a hard time attracting some of the bigger names of your party. There were a lot of former deputy secretaries of state, of defense, others were out there. And the list of advisers you’ve released so far has been very strong on having military backgrounds but not many with diplomatic backgrounds. We were wondering whether or not you are looking for a different mix or whether you’re having trouble attracting some of the big names.

TRUMP: It’s interesting, it’s not trouble attracting. Many of them that I actually like a lot and that like me a lot and that want to do 100 percent, many of them are tied up with contracts working for various networks, you understand? I mean, I’ve had some that are — I currently have some that are thinking about getting out of their contract ‘cause they’re so excited about it. I’ve had a lot of excitement but there are some that are tied up where they have a contract with, as an example, they might have a contract with Fox, they may have a contract with CNN and they can’t do it. They have contracts with the various networks and maybe the media too. I don’t know about The Times but it’s possible — I think less likely, I’m not sure how that structure works with the actual newspapers. But there are some that I’ve spoken to that want to do it but they’re tied up with contracts that are with somebody else. There are some that were with campaigns that have now imploded, and I think they’re going to be free agents very shortly. Hey, a lot of campaigns have imploded in the last couple of months, which you people perhaps have seen just as vividly as I have. Right? Not as happily as I have, but nevertheless just as vividly. So you know there are actually, there are a lot of people available, there are a lot of good people available. But some of the good people are currently under contract. Does that make sense to you, David?

SANGER: Yup, Maggie, did you having anything more on that before we wanted to turn back to Israel?

HABERMAN: Yeah, Mr. Trump, if you could just say how much time are you devoting a week at this point either to briefings to studying, you know, and if there’s no major change now what it might look like in the future?

TRUMP: I think that you know, what I’ve really had to do is get through 17, cause it was really 18 total when we started. So I had to get through 17 people. I’ve gotten through almost all of the 17 people. But I’m down to two, from 17 to two. And you know many of them were front-runners, and they weren’t front-runners for very long. You can go through the list, you know the list as well as I do. And my primary focus was that.

But during the period I’ve been, I think very well versed on matters as we’re discussing and many more than just what we’re just discussing. Now as it gets — as we get you know closer to the end of the process it‘ll take place more and more. I’m setting up a council, I’m setting up — and I have other people coming in, I gave you the other few names I think that we added, we have a few more coming in. But I have a few more that are going to come in. I just don’t want to I just don’t want to mention them unless they give me approval, meaning they’re on board.

And we’re going to have a very substantial council of very good people. And some of them are military. Look, the military is going to be very important because we have to do something with ISIS, David, and you know we do want the military. And I think that over the next few weeks I’ll be able to give you some more names. People that are going to be coming in.

SANGER: Do you fear that if you have too many military on your council, they tend to search for the military solution first instead of the diplomatic or economic sanction solution first?

TRUMP: Yeah but I’d like to know the military solution and I’m working on the military solution. Because there’s not huge negotiation involved with ISS, because there’s an irrationality that is pretty — this is not something, ‘Oh let’s make a deal.’ I don’t see deals being made with ISIS. Nobody knows what ISIS is, nobody knows who is leading it, who is alive, who is not alive, I mean we’re really not talking about too many diplomatic solutions. We’re not talking about diplomatic solutions with ISIS, let me put it that way.

U.S. Influence in East Asia

SANGER: I wasn’t referring to that in the ISIS context, I was referring more in the realm of dealing with our allies, dealing with China, dealing with Japan, the other places that we’ve discussed.

TRUMP: So ISIS I think you’d agree with me on that and the rest will come. I have really strong feelings on China. I like China very much I like Chinese people. I respect the Chinese leaders, but you know China’s been taking advantage of us for many, many years and we can’t allow it to go on. And at the same time we’ll be able to keep a good relationship with China. And same with Japan and same with — you have to see the trade imbalance between Japan and the United States, it’s unbelievable. They sell to us and we practically give them back nothing by comparison. It’s a very unfair situation.

SANGER: They also pay more for troop support than any other country in the world.

TRUMP: They do but still far less than it costs us.

HABERMAN: Would you be willing —

TRUMP: You’re right about that David, but it’s — and they do pay somewhat more, but they pay more because of the tremendous amount of business that they do with us, uneconomic business from our standpoint.

HABERMAN: Would you be willing to withdraw U.S. forces from places like Japan and South Korea if they don’t increase their contribution significantly?

TRUMP: Yes, I would. I would not do so happily, but I would be willing to do it. Not happily. David actually asked me that question before, this morning before we sort of finalized out. The answer is not happily but the answer is yes. We cannot afford to be losing vast amounts of billions of dollars on all of this. We just can’t do it anymore. Now there was a time when we could have done it. When we started doing it. But we can’t do it anymore. And I have a feeling that they’d up the ante very much. I think they would, and if they wouldn’t I would really have to say yes.

SANGER: So we talked a little this morning about Japan and South Korea, whether or not they would move to an independent nuclear capability. Just last week the United States removed from Japan, after a long negotiation, many bombs worth, probably 40 or more bombs worth of plutonium or highly enriched uranium that we provided them over the years. And that’s part of a very bipartisan effort to keep them from going nuclear. So I was a little surprised this morning when you said you would be open to them having their own nuclear deterrent. Certainly if you pull back one of the risks is that they would go nuclear.

TRUMP: You know you’re more right except for the fact that you have North Korea which is acting extremely aggressively, very close to Japan. And had you not had that, I would have felt much, I would have felt differently. You have North Korea, and we are very far away and we are protecting a lot of different people and I don’t know that we are necessarily equipped to protect them. And if we didn’t have the North Korea threat, I think I’d feel a lot differently, David.

SANGER: But with the North Korea threat you think maybe Japan does need its own nuclear…

TRUMP: Well I think maybe it’s not so bad to have Japan — if Japan had that nuclear threat, I’m not sure that would be a bad thing for us.

SANGER: You mean if Japan had a nuclear weapon it wouldn’t be so bad for us?

TRUMP: Well, because of North Korea. Because of North Korea. Because we don’t know what he’s going to do. We don’t know if he’s all bluster or is he a serious maniac that would be willing to use it. I was talking about before, the deterrent in some people’s minds was that the consequence is so great that nobody would ever use it. Well that may have been true at one point but you have many people that would use it right now in this world.

SANGER: For that reason, they may well need their own and not be able to just depend on us…

TRUMP: I really believe that’s true. Especially because of the threat of North Korea. And they are very aggressive toward Japan. Well I mean look, he’s aggressive toward everybody. Except for China and Iran.

See we should use our economic power to have them disarm — now then it becomes different, then it becomes purely economic, but then it becomes different. China has great power over North Korea even though they don’t necessarily say that. Now, Iran, we had a great opportunity during this negotiation when we gave them the 150 billion and many other things. Iran is the No. 1 trading partner of North Korea. Now we could have put something in our agreement that they would have led the charge if we had people with substance and with brainpower and with some negotiating ability. But the No. 1 trading partner with North Korea is Iran. And we did a deal with them, and we just did a deal with them, and we don’t even mention North Korea in the deal. That was a great opportunity to put another five pages in the deal, or less, and they do have a great influence over North Korea. Same thing with China, China has great influence over North Korea but they don’t say they do because they’re tweaking us. I have this from Chinese. I have many Chinese friends, I have people of vast wealth, some of the most important people in China have purchased apartments from me for tens of millions of dollars and frankly I know them very well. And I ask them about their relationship to North Korea, these are top people. And they say we have tremendous power over North Korea. I know they do. I think you know they do.

SANGER: They signed on to the most recent sanctions, more aggressive sanctions than we thought the Chinese would agree to.

TRUMP: Well that’s good, but, I mean I know they did, but I think that they have power beyond the sanctions.

SANGER: So you would advocate that they have to turn off the oil to North Korea basically.

TRUMP: So much of their lifeblood comes through China, that’s the way it comes through. They have tremendous power over North Korea, but China doesn’t say that. China says well we’ll try. I can see them saying, “We’ll try, we’ll try.” And I can see them laughing in the room next door when they’re together. So China should be talking to North Korea. But China’s tweaking us. China’s toying with us. They are when they’re building in the South China Sea. They should not be doing that but they have no respect for our country and they have no respect for our president. So, and the other one, and this is an opportunity passed because why would Iran go back and renegotiate it having to do with North Korea?But Iran is the No. 1 trading partner, but we should have had something in that document that was signed having to do with North Korea as the No. 1 trading partner and as somebody with a certain power because of that. A very substantial power over North Korea.

SANGER: Mr. Trump with all due respect, I think it’s China that’s the No. 1 trading partner with North Korea.

TRUMP: I’ve heard that certainly, but I’ve also heard from other sources that it’s Iran.

SANGER: Iran is a major arms exchanger with…

TRUMP: Well that is true but I’ve heard it both ways. They are certainly major arms exchangers, which in itself is terrible that we would make a deal with somebody that’s a major arms exchanger with North Korea. But had that deal not been done and they were desperate to do it, and they wanted to do it much more so than we know in my opinion, meaning Iran wanted to make the deal much more than we know. We should have backed off that deal, doubled the sanctions and made a real deal. And part of that deal should have been that Iran would help us with North Korea. So, the bottom line is, I think that frankly, as long as North Korea’s there, I think that Japan having a capability is something that maybe is going to happen whether we like it or not.

Boots on the Ground

SANGER: O.K.. We wanted to ask you a little bit, and Maggie maybe you may have something on this as well, about what standards you would use for using American troops abroad. You’ve said you wouldn’t want to send them in against ISIS, that that should be the neighbors. But you did say this morning that if we have a treaty obligation under NATO to protect the Baltics, you would do that. When you think of your standards under which you would put American lives…

TRUMP: Well I think, I do think I’d want to renegotiate some of those treaties. I think those treaties are very unfair, and they’re very one-sided and I do think that some of those treaties, just like the Iran deal. But I think that some of those treaties would — will be — renegotiated.

SANGER: Such as the U.S.-Japan defense treaty?

TRUMP: Well, like Japan as an example. I mean that’s not a fair deal.

SANGER: Do you have general standards in mind? And, we’re trying to understand your hierarchy of threats.

TRUMP: Are you talking about for…

SANGER: For when you would commit American troops abroad?

TRUMP: O.K. I know you’ll criticize me for this, but you cannot just have a standard. You cannot just say that we have a blanket standard all over the world because each instance is totally different, David. I mean, each instance is so different that you can’t have a blanket standard. You may say… it sounds nice to say, “I have a blanket standard; here’s what it is.” Number one is the protection of our country, O.K.? That’s always going to be number one, by far. That’s by a factor of a hundred. But you know, then there will be standards for other places but it won’t be a blanket standard.

SANGER: Humanitarian intervention: Are you in favor of that or not?

TRUMP: Humanitarian? Yes, I would be. You know, to help I would be, depending on where and who and what. And, you know, again — generally speaking — I’d have to see the country; I’d have to see what’s going on in the region and you just cannot have a blanket. The one blanket you could say is, “protection of our country.” That’s the one blanket. After that it depends on the country, the region, how friendly they’ve been toward us. You have countries that haven’t been friendly to us that we’re protecting. So it’s how good they’ve been toward us, et cetera, et cetera. So you can’t say a blanket. You could say standards for different areas, different regions, and different countries.

Israel and the Palestinians

HABERMAN: You had said earlier, I think, when you called David that you had wanted to elaborate on your answer about Israel and a two-state solution. I just wanted to…

TRUMP: Well, not elaborate. I just put it off because I was running out of time and I didn’t want to get into it too much because it’s actually not that. So should we talk about Israel for a little while?


TRUMP: I have gotten some of the reviews of my speech at Aipac and, really, they’ve been very nice. They were very nice. Were you there? Were either of you at that speech?


SANGER: I saw it on TV.

TRUMP: You saw the response Maggie, then, from the crowd?

HABERMAN: I did. I did.

TRUMP: Many, many standing ovations and they agreed with what I said. Basically I support a two-state solution on Israel. But the Palestinian Authority has to recognize Israel’s right to exist as a Jewish state. Have to do that. And they have to stop the terror, stop the attacks, stop the teaching of hatred, you know? The children, I sort of talked about it pretty much in the speech, but the children are aspiring to grow up to be terrorists. They are taught to grow up to be terrorists. And they have to stop. They have to stop the terror. They have to stop the stabbings and all of the things going on. And they have to recognize that Israel’s right to exist as a Jewish state. And they have to be able to do that. And if they can’t, you’re never going to make a deal. One state, two states, it doesn’t matter: you’re never going to be able to make a deal. Because Israel would have to have that. They have to stop the terror. They have to stop the teaching of children to aspire to grow up as terrorists, which is a real problem. So with that you’d go two states, but in order to go there, before you, you know, prior to getting there, you have to get those basic things done.

Now whether or not the Palestinians can live with that? You would think they could. It shouldn’t be hard except that the ingrained hatred is tremendous.

Countering Extremism

HABERMAN: You had talked, and you’ve talked a lot recently, about wanting to expand laws regarding torture.


HABERMAN: Much of that is governed by international law.


HABERMAN: How would you go about bringing changes to…?

TRUMP: O.K., when you see a thing like an attack in Brussels, when you see as an example they have somebody that they’ve wanted very much, and they got him three, four days before Brussels, right? Before the bombing. Had they immediately subjected him to very serious interrogation — very, very serious — you might have stopped the bombing. He knew about the bombing. Just like the people, just like all of that people in the area where he grew up — where he was housed a couple of houses down the road — they all knew he was there. And they never turned him in. This is what I’m saying: there’s something going on and it’s not good. He was the No. 1 wanted fugitive in the world and he’s living in his neighborhood, and I believe I saw a picture of him shopping in his neighborhood, right? In a grocery store? You know: shopping! Buying food! I mean, it’s ridiculous they don’t turn him in. Just like in California, the two people, where she probably radicalized him but they don’t know, but the two — the married couple — that killed the 14 people: they had bombs all over the floor of their apartment and nobody said anything. And many people saw that apartment and many people saw bombs. You know, if you walk into an apartment, Maggie or David, you’re going to say, “Oh, this is a little strange.”

SANGER: So would you invest in programs, or help the Europeans invest in programs, for counter-radicalization? For finding jobs and so forth for the refugees who come in so that their temptation to go to become radicalized in Europe would be lower? In other words do you have a program in mind to stop the radicalization?

TRUMP: The one thing I’d do, David, is build safe zones in Syria. You know this whole concept of us accepting, you know, tens of thousands of people, and you see I was originally right when I said, many more people, you know he was talking about 10,000, you know it’s many more people than 10,000 are coming in. And will come in.

SANGER: And who would protect those safe zones, you know as soon as you build one…?

TRUMP: O.K., what I would do is this: We could lead it, but I would get the Gulf states and others to put up the money. I mean Germany should put up money. Look what’s happened to Germany. Germany’s being destroyed and I have friends, I just left people from Germany and they don’t even want to go back. Germany’s being destroyed by Merkel’s naiveté or worse. But Germany is a whole different place and you’re going to have a problem in Germany. The German people are not going to take it. The German people are not going to take what’s going on there. You have people leaving the country, permanently leaving the country. You have tremendous crime, you have tremendous, you know, you read the same stories that I do. You write them, actually, it’s even better. So you have tremendous problems over there but I do believe in building a safe zone, a number of safe zones, in sections of Syria and that when this war, this horrible war, is over people can go back and rebuild if they want to and I would have the Gulf states finance it because they have the money and they should finance it. So far, they’ve put up very little money and they taken nobody in, essentially nobody in. I would be very strong with them because they have tremendous, they have unlimited amounts of money, and I would ask them to finance it. We can lead it but I don’t want to spend the money on it, because we don’t have any money. Our country doesn’t have money.

A Strong China

SANGER: I wanted to take you back to something you said on China earlier because your arguments about China so far have really been, over the years, very much about how to deal with a strong and rising China. But what we’ve seen in the past six months to a year has been a China that is economically weakening. I’m sure you see it in your own businesses there. So do you have a sense…

TRUMP: Well, they’re down to G.D.P. of 7 percent.

SANGER: If you believe their numbers.

TRUMP: Yeah, if we ever hit 7 percent we’d have the most successful country. We’d be in a boom, the likes of which we’ve rarely seen before, right?

SANGER: What I’m getting at is a weakening China may have different effects on the world and on the United States than a strengthening China. Do you fear a weaker China or a weakening China more than a strong China?

TRUMP: No. I want a strong United States and I hope China does well, but before I worry about China I have to worry about the United States and we’re not doing well.

SANGER: You’ve given us a lot of your impressions of Vladimir Putin. We haven’t heard you very much on Xi Jinping.

TRUMP: Well I haven’t said anything. By the way, I’ve been really misquoted. Vladimir Putin said, “Donald Trump is brilliant and Donald Trump is a real leader. And Donald Trump will be the real leader.” O.K.? I didn’t say anything about him other than to say… I said, we were on “60 Minutes” the same night, remember? That was six months ago. But I never said good, bad, or indifferent. I said he is a strong leader, he is a strong leader. But I didn’t say that, and I’m not saying that positively or negatively, I’m just saying he’s a strong leader. That’s pretty obvious that he’s a strong leader.

SANGER: What’s your impression of Xi Jinping?

TRUMP: I think they are in a very interesting position. The economy is going to be, I think actually very strong but the economy, I think they’re doing better than people understand. Nobody has manipulated economic conditions better than they have. And I think they’re doing just fine and I think they will continue to do just fine. But a lot of it’s being taken out of the hide of our country and we can’t allow that to happen. You know if you look at the number of jobs that we’ve lost, it’s millions of jobs. It’s not a little bit, it’s millions. And if you look at our phony numbers of 5 percent unemployment, even opponents would say that, and would agree to that fact that the jobs that we have are bad jobs. They’re not good jobs, they’re bad jobs. We’re losing, you know, when you see a Carrier move into Mexico, those are good jobs. We’re losing the good jobs. We now have a lot of bad jobs, we have a lot of part-time jobs. It’s not the same country. We’re losing our companies. I mean when we lose Pfizer to Ireland, when we lose Ford and Carrier and many others to, Nabisco as an example from Chicago to Mexico, when we lose all of these companies going to Mexico and to many other places, we’re going to end up having no comp— we’re going to have nothing left. And it has to be stopped, and it has to be stopped fast and I know how to stop it. Nobody else, the politicians don’t know how to stop it. And besides that the politicians are all taken care of by the special interests and the lobbyists. Lobbyists for hire. And somebody will get to them and they will pay them a lot of money and the politicians will not do what they have to do, which is keep companies in this country. Those companies that want to leave will get to the lobbyists and the special interests and those politicians will do what they want them to do, which is not in the interest of our country. O.K.

Lessons Learned From Iraq

HABERMAN: Mr. Trump, I have heard you say for years now, including at your CPAC speech back in 2011, “Take the oil.” That America should have taken the oil from Iraq.

TRUMP: I’ve said it for years.

HABERMAN: Why should the American…?

TRUMP: Originally I didn’t say it. Originally I said, “Don’t go into Iraq.”


TRUMP: Now, we went in, we destroyed a military base that was equal to, if not greater than, Iran. And we’ve destroyed that military, and they were holding each other off for many, you know for decades, decades, and we destroyed one of those military powers. And I said don’t go in because if you dest — now, I didn’t know that they didn’t have weapons of mass destruction. But on top of everything else they had no weapons of mass destruction.

HABERMAN: Well, but sir, why should the American approach to rebuilding Iraq, or other countries where we have shed blood, why should that differ from how we rebuilt postwar Japan and Germany in the Marshall Plan?

TRUMP: Well it was much different. We rebuild Iraq and it gets blown up. We build a school? Gets blown up. Build it again? Gets blown up. You know, it’s a mess. I mean you have government that’s totally corrupt.

The country is totally, totally corrupt and corruptible. The leader, I mean one of the big decisions that was made putting the people in charge of Iraq that were in charge of Iraq, and they were exclusionary. They excluded people that ultimately, you know large groups of people, that ultimately became ISIS. Became stronger than them. And the sad thing is, I always talk about the bad deal that we made with Iran as being one of the worst deals, actually the worst deal is what we’ve done again involving Iran, we’ve destroyed the military capability of Iraq and destroyed Iraq, period, and Iran is now going to take over Iraq, they’ve essentially already done that in my opinion, but they’re going to officially take over Iraq in the very near future.And I mean Iraqis were already reporting to Iran, but Iran is going to take over Iraq, they’ve wanted to do it for decades. They’re going to take over Iraq, they’re going to take the oil reserves which are the second biggest in the world, extremely high quality oil under the ground, extremely high quality, they’re going to take all of that over because of us. Because we destroyed —

SANGER: But Mr. Trump you’ve argued many times that you don’t want to have ground troops, but”We take the oil” implies you’re going to have to go in there and take it by force, defend it —

TRUMP: Well what I said is, I said when we left that we should have taken the oil.

SANGER: If you want to take the oil today you’re going to have to go into a country that is now an ally, Iraq, even if it’s a dysfunctional one, put your troops on the ground.

TRUMP: Yeah, yeah, O.K.. Ready? I said take the oil. I’ve been saying that for years. And many very smart scholars and military scholars said that’d be a great thing to do, but people didn’t do it. So, but I have been saying that for years, I’m glad you know that. At least four or five years. When we left I said take the oil.

We shouldn’t have been there, we shouldn’t have destroyed the country, and Saddam Hussein was a bad guy but he was good at one thing: Killing terrorists. He killed terrorists like nobody, all right? Now it’s Harvard of terrorism. You want to be a terrorist you go to Iraq. But he killed terrorists. O.K., so we destroyed that. By the way, bad guy, just so you know, officially, I want to say that, bad guy, but it was a lot better of situation than we have right now. And he did not knock down the World Trade Center, O.K.? So officially speaking, he did not, Iraq did not knock down the World Trade center. We went in there after the World Trade Center, well he didn’t knock down the World Trade Center, so you could say why are we doing this, all right, that was another thing. I never felt that he did it, and it turned out that he didn’t. And it’ll be very interesting when those documents are opened up and released in the future, I think maybe they should be opened up and released sooner rather than later.

HABERMAN: You mean the House, the House and Senate report?

TRUMP: Yes, yes, exactly. It’d be very interesting to see because they must know. They must know, if they’re anything, they must know what happened in terms of who were the people. But it wasn’t Iraq, O.K.? You’re not going to find that it was Iraq. So it was very faulty, but I was, I was talking about, I was talking about taking the oil, now we have a different situation because now we have to go in again and start fighting, you know, at that time we had it and we should’ve kept it. Now I would say knock the hell out of the oil and do it because it’s a primary source of money for ISIS.

SANGER: So in other words you don’t want to take the oil right now, you want to just destroy the oil fields.

TRUMP: Well now, we have to destroy the oil. We should’ve taken it and we would’ve have it. Now we have to destroy the oil. We don’t do it, I just can’t believe we don’t do it.

SANGER: So you know Mr. Trump, from listening and enjoying these two conversations we’ve had today which have been extremely interesting, I’ve been trying to sort of fit where your worldview and your philosophy here, your doctrine fits in with sort of the previous Republican mainlines of inquiry. And so if you think back to George H. W. Bush, the most recent President Bush’s father, he was an internationalist who was in the realist school, he wanted to sort of change the foreign policy of other nations but you didn’t see him messing inside those countries and then you had a group of people around —

TRUMP: Well he did the right thing, David, he did the right thing. He went in, he knocked the hell out of Iraq and then he let it go, O.K.? He didn’t go in. Now I don’t know was that Schwarzkopf, was that, was that —

SANGER: It was George W. Bush himself.

TRUMP: Or maybe it was him, but he didn’t go in, he didn’t get into the quicksand, right? He didn’t get into the quicksand and I mean, history will show that he was right. And with that Saddam Hussein overplayed his card more than any human being I think I’ve ever seen. Instead of saying “Wow, I got lucky” that they didn’t come in and take this all away from me. He should’ve just relaxed a little bit, O.K.? And instead he taunted Bush Sr. He taunted him. And Bush Jr. loves his father and didn’t like what was happening, but I remember very vividly how Saddam Hussein was taunting, absolutely taunting, saying we have beaten the Americans, you know, meaning they didn’t come in so he would tell everybody he beat them. Do you remember that, right?

SANGER: I do indeed.

TRUMP: And he was taunting to them, he was saying, and even I used to say “Wow” because I knew that we could’ve gone further. We went in for a short period of time and just knocked the hell out of them and then went back, sort of gave them a lesson, but we didn’t destroy the country, we didn’t destroy the grid, we didn’t, you know, there was something left. There was a lot left. And instead of just sort of saying he got lucky and to himself, just going about, he was taunting the Bushes. And Junior said, “Well I’m not going to take it” and he went in. And you know, look that was —

‘America First’

SANGER: There was something else to George W. Bush, Bush 43’s philosophy. If we believed that his father was an internationalist, I think it’s fair to say, at least a lot of the people around George W. Bush were transformational, they actually wanted to change the nature of regime. You heard this in George W. Bush’s second inaugural address.

TRUMP: Yeah.

SANGER: What you are describing to us, I think is something of a third category, but tell me if I have this right, which is much more of a, if not isolationist, then at least something of “America First” kind of approach, a mistrust of many foreigners, both our adversaries and some of our allies, a sense that they’ve been freeloading off of us for many years.

TRUMP: Correct. O.K.? That’s fine.

SANGER: O.K.? Am I describing this correctly here?

TRUMP: I’ll tell you — you’re getting close. Not isolationist, I’m not isolationist, but I am “America First.” So I like the expression. I’m “America First.” We have been disrespected, mocked, and ripped off for many many years by people that were smarter, shrewder, tougher. We were the big bully, but we were not smartly led. And we were the big bully who was — the big stupid bully and we were systematically ripped off by everybody. From China to Japan to South Korea to the Middle East, many states in the Middle East, for instance, protecting Saudi Arabia and not being properly reimbursed for every penny that we spend, when they’re sitting with trillions of dollars, I mean they were making a billion dollars a day before the oil went down, now they’re still making a fortune, you know, their oil is very high and very easy to get it, very inexpensive, but they’re still making a lot of money, but they were making a billion dollars a day and we were paying leases for bases? We’re paying leases, we’re paying rent? O.K.? To have bases over there? The whole thing is preposterous. So we had, so America first, yes, we will not be ripped off anymore. We’re going to be friendly with everybody, but we’re not going to be taken advantage of by anybody. We won’t be isolationists — I don’t want to go there because I don’t believe in that. I think we’ll be very worldview, but we’re not going to be ripped off anymore by all of these countries. I mean think of it.We have $21 trillion, essentially, very shortly, we’ll be up to $21 trillion in debt. O.K.? A lot of that is just all of these horrible, horrible decisions. You know, I’ll give you another one, I talked about NATO and we fund disproportionately, the United Nations, we get nothing out of the United Nations other than good real estate prices. We get nothing out of the United Nations. They don’t respect us, they don’t do what we want, and yet we fund them disproportionately again. Why are we always the ones that funds everybody disproportionately, you know? So everything is like that. There’s nothing that’s not like that.

That’s why if I win and if I go in, it’s always never sounds — I have a woman who came up to me, I tell this story, she said “Mr. Trump, I think you’re great, I think you’re going to be a great president, but I don’t like what you say I got to make America rich again.” But you can’t make America great again unless you make it rich again, in other words, we’re a poor nation, we’re a debtor nation, we don’t have the money to do, we don’t have the money to fix our military and the reason we don’t is because of the fact that because of all of the things we’ve been talking about for the last 25 min and other things.

When America Was ‘Great’

HABERMAN: Mr. Trump, you — I was looking back at your speech in New Hampshire back in 1987 when you were releasing “The Art of the Deal” and a lot of your concerns are very similar to the ones you’re voicing now.

TRUMP: Right, even similar countries.

HABERMAN: Right, and I’m just wondering what is the era when you think the United States last had the right balance, either in terms of defense footprint or in terms of trade?

TRUMP: Well sometime long before that. Because one of the presidents that I really liked was Ronald Reagan but I never felt on trade we did great. O.K.? So it was actually, it would be long before that.

SANGER: So was it Eisenhower, was it Truman, was it F.D.R.?

TRUMP: No if you really look at it, it was the turn of the century, that’s when we were a great, when we were really starting to go robust. But if you look back, it really was, there was a period of time when we were developing at the turn of the century which was a pretty wild time for this country and pretty wild in terms of building that machine, that machine was really based on entrepreneurship etc, etc. And then I would say, yeah, prior to, I would say during the 1940s and the late ‘40s and ‘50s we started getting, we were not pushed around, we were respected by everybody, we had just won a war, we were pretty much doing what we had to do, yeah around that period.

SANGER: So basically Truman, Eisenhower, the beginning of the 1947 national security reviews, that’s the period?

TRUMP: Yes, yes. Because as much as I liked Ronald Reagan, he started NAFTA, now Clinton really was the one that — NAFTA has been a disaster for our country, O.K., and Clinton is the one as you know that got it done, but it was conceived even before Clinton, but you could say that maybe those people didn’t want done what was ultimately signed because it was changed a lot by the time it got finalized. But NAFTA has been a disaster for our country.

SANGER: But you think of that period time that you most admire: late ‘40s, early ‘50s, it was also the most terrifying time with the build up of the Cold War, it’s when the Russians got nuclear weapons, we got into an arms race, we were —

TRUMP: But David, a lot of that was just pure technology. The technology was really coming in at that time. And so a lot of that was just timing of technology.

SANGER: It was also a period of time when we were threatening to use nuclear weapons against the North Koreans and the Chinese in the war. Was that approach you saw of Douglas MacArthur’s approach at that time, so forth, is that what you’re admiring?

TRUMP: Well I was a fan as you probably know, I was a fan of Douglas MacArthur. I was a fan of George Patton. If we had Douglas MacArthur today or if we had George Patton today and if we had a president that would let them do their thing you wouldn’t have ISIS, O.K.? You wouldn’t be talking about ISIS right now, we’d be talking about something else, but you wouldn’t be talking about ISIS right now. So I was a fan of Douglas MacArthur, I was a fan of — as generals — I was a fan of George Patton. We don’t have, we don’t have seemingly those people today, now I know they exist, I know we have some very, I know the Air Force Academy and West Point and Annapolis, I know that great people come out of those schools. A lot of times the people that get to the top aren’t necessarily those people anymore because they’re politically correct. George Patton was not a politically correct person.

SANGER: Yeah I think we can all agree on that.

TRUMP: He was a great general and his soldiers would do anything for him.

SANGER: But the other day, I’m sorry, this morning, you suggested to us you would only use nuclear weapons as a last resort.

TRUMP: Totally last resort.

TRUMP: I would hate, I would hate —

SANGER: General MacArthur wanted to go use them against the Chinese and the North Koreans, not as a last resort.

TRUMP: That’s right. He did. Yes, well you don’t know if he wanted to use them but he certainly said that at least.

SANGER: He certainly asked Harry Truman if he could.

TRUMP: Yeah, well, O.K.. He certainly talked it and was he doing that to negotiate, was he doing that to win? Perhaps. Perhaps. Was he doing that for what reason? I mean, I think he played, he did play the nuclear card but he didn’t use it, he played the nuclear card. He talked the nuclear card, did he do that to win? Maybe, maybe, you know, maybe that’s what got him victory. But in the meantime he didn’t use them. So, you know. So, we need a different mind set.

So you talked about torture before, well what did it say — well I guess you had enough and I hope you’re going to treat me fairly and if you’re not it’ll be forgotten in three or four days and that’ll be the story. It is a crazy world out there, I’ve never seen anything like it, the volume of press that I’m getting is just crazy. It’s just absolutely crazy, but hopefully you’ll treat me fairly, I do know my subject and I do know that our country cannot continue to do what it’s doing. See, I know many people from China, I know many people from other countries, I deal at a very high level with people from various countries because I’ve become very international. I’m all over the world with deals and people and they can’t believe what their countries get away with. I can tell you people from China cannot believe what their country’s, what their country’s getting away with. At let’s say free trade, where, you know, it’s free there but it’s not free here.

In other words, we try sell — it’s very hard for us to do business in China, it’s very easy for China to do business with us. Plus with us there’s a tremendous tax that we pay when we go into China, where’s when China sells to us there’s no tax. I mean, it’s a whole double standard, it’s so crazy, and they cannot believe they get away with it, David. They cannot believe they get away with it. They are shocked, and I’m talking about people at the highest level, people at — the richest people, people with great influence over, you know, together with the leaders and they cannot believe it. Mexico can’t believe what they get away with.

When I talked about Mexico and I talked about they will build a wall, when you look at the trade deficit we have with Mexico it’s very easy, it’s a tiny fraction of what the cost of the wall is. The wall is a tiny fraction of what the cost of the deficit is. When people hear that they say “Oh now I get it.” They don’t get it. But Mexico will pay for the wall. But they can’t believe what they get away with. There’s such a double standard. With many countries. It’s almost, we do well with almost nobody anymore and a lot of that is because of politics as we know it, political hacks get appointed to negotiate with the smartest people in China, when we negotiate deals with China, China is putting the smartest people in all of China on that negotiation, we’re not doing that. So anyway, I hope you guys are happy.

SANGER: Thank you, you’ve been very generous with your time.


The Role of India and China in South Asia

July 27, 2017

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Number 389 | July 26, 2017


The Role of India and China in South Asia

by Christian Wagner

India and China have a long and complex bilateral relationship that oscillates between concepts of “Chindia” and great power rivalry. In South Asia, India seems to be a regional power by default. But a closer look reveals that China is gaining an upper hand in the region. The analytical framework of the regional power debate helps to explain the different approaches between the two countries towards South Asia. Developments in the fields of politics, economics, and security indicate that India is at a structural disadvantage to China in the region.Despite its superior material resources relative to other South Asian states, India has never managed to establish itself as a regional power.

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Attempts by Nehru and Indira Gandhi to portray the region as part of India’s national security and to secure the country’s foreign political interests through military, economic, and political interventions were mostly unsuccessful. Several factors have always undermined India’s regional power ambitions.

First, because of the common religious, linguistic, and ethnic ties, foreign policy debates in the neighboring countries are often linked with debates about national identity which emphasize the distinctions from India. Hence, Indian interventions in the neighboring countries have often been perceived as threats to their respective national identities. In Sri Lanka, Buddhist nationalist groups have always been critical of India, in Bangladesh, the debate on Bengali and Bangladeshi nationalism is closely related with India, and in Nepal there is a controversy in most parties on the relations with the bigger neighbor to the South. The common religious, ethnic, and linguistic traditions that seem to bind the region have also acted as a counterbalance against India’s regional ambitions.

Second, India has not pursued its foreign policy interests vis-à-vis its neighbors in a consistent manner, nor has it applied political, economic, and military capacities to achieve sustainable outcomes. The military victory over Pakistan in 1971 was not followed by a permanent settlement of the Kashmir issue. India supported Bangladesh after its independence in 1971 but could not prevent Bangladesh’s economic and political realignment after the military coup in 1975. India’s attempts to mediate in the Sri Lankan civil war in the late 1980s ended in political and military disaster.

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Finally, all neighbors have used the strategy of internationalizing their bilateral disputes with India, more or less successfully. Pakistan is the most obvious case, but Bangladesh, Nepal, and Sri Lanka have also played the “China card” at various times.Since the economic liberalization in 1991, India has put its South Asia policy on a new foundation. Since then, South Asia is not only seen as an area of significance to India’s national security, but also as a market that can contribute to India’s economic development. The Gujral doctrine has emphasized the principle of non-reciprocity vis-à-vis India’s smaller neighbors.

The government of Prime Minister Manmohan Singh promoted bilateral and multilateral initiatives in order to provide regional public goods, like better connectivity and made unilateral economic concessions to the weaker states in order to expand intra-regional trade. India has also improved its security collaboration with most South Asian countries in recent years, except for Pakistan. This indicates that the threat perceptions among most South Asian governments have converged. The transnational networks of different militant groups are now seen as a common security challenge, leading to more cooperation among the security forces.

Despite India’s changing South Asia policy, China has strengthened its position in the region. Politically, China has the advantage of being regarded as a “neutral” player in most South Asian countries, except for India.  China has never been part of the discourse on nation-building in South Asia; therefore, China’s bilateral relations with most countries of the region are not marred by the baggage of socio-cultural ties and previous interventions. Economically, China is also a more attractive partner for South Asian countries than India.

The massive Chinese investment in India’s neighborhood in the context of its “One Belt One Road (OBOR)” Initiative will increase Beijing’s influence in South Asia. China has also expanded its trade relations and has surpassed India in some cases. Even in India, China has emerged as a significant economic actor. In the field of security, China has increased its military cooperation, supplying arms to many South Asian countries.  The Chinese infrastructure investments and security cooperation in the region have fostered apprehensions in India about encirclement by China.

India seems to be caught in a catch-22 in South Asia. On the one hand, the religious, linguistic, and ethnic ties bind India with the region. On the other hand, those ties separate India from its neighbors with regard to nation-building. Such structural links, and their effects, are difficult to address. Hence, India will hardly be able to overcome resentments in the neighboring countries and to counter the advantages that China enjoys in many South Asia countries in politics, economics, and security.China remains an economically more attractive and politically more reliable partner for most of India’s neighbors.

Despite their bilateral problems and tensions from respective engagement in South Asia, India and China have also increased their collaboration on the global level, for instance in the BRICS group (Brazil, Russia, India, China, South Africa). In the regional context, both countries are cooperating on initiatives like the Bangladesh-China-India-Myanmar corridor (BCIM), and China has also promised to make large scale infrastructure investment in India.

“The Chinese infrastructure investments and security cooperation in the region have fostered apprehensions in India about encirclement by China.”


But these joint collaborations should not obscure the fact that India is structurally in a weaker position in South Asia compared to China. India is therefore losing its influence in South Asia vis-à-vis China. But it remains an open question how far the growing dependence on China will be a better deal for South Asian countries in the long term perspective.

About the Author

Christian Wagner is Senior Fellow at the German Institute for International and Security Affairs (SWP), Berlin. He can be contacted at Christian.Wagner@swp-berlin.org.

The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.Established by the US Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options.

The Asia Pacific Bulletin (APB) series is produced by the East-West Center in Washington.

APB Series Editor: Dr. Satu Limaye, Director, East-West Center in Washington
APB Series Coordinator: Peter Valente, Project Assistant, East-West Center in Washington

The views expressed in this publication are those of the authors and do not necessarily reflect the policy or position of the East-West Center or any organization with which the author is affiliated.For comments/responses on APB issues or article submissions, please contact washington@eastwestcenter.org.

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Deciphering China’s Economic Resilience

July 26, 2017

Deciphering China’s Economic Resilience

by Stephen S. Roach*

*Stephen S. Roach, former Chairman of Morgan Stanley Asia and the firm’s chief economist, is a senior fellow at Yale University’s Jackson Institute of Global Affairs and a senior lecturer at Yale’s School of Management. He is the author of Unbalanced: The Codependency of America and China.


Once again, the Chinese economy has defied the hand wringing of the nattering nabobs of negativism. After decelerating for six consecutive years, real GDP growth appears to be inching up in 2017. The 6.9% annualized increase just reported for the second quarter exceeds the 6.7% rise in 2016 and is well above the consensus of international forecasters who, just a few months ago, expected growth to be closer to 6.5% this year, and to slow further, to 6%, in 2018.

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I have long argued that the fixation on headline GDP overlooks deeper issues shaping the China growth debate. That is because the Chinese economy is in the midst of an extraordinary structural transformation – with a manufacturing-led producer model giving way to an increasingly powerful services-led consumer model.

To the extent that this implies a shift in the mix of GDP away from exceptionally rapid gains in investment and exports, toward relatively slower-growing internal private consumption, a slowdown in overall GDP growth is both inevitable and desirable. Perceptions of China’s vulnerability need to be considered in this context.

This debate has a long history. I first caught a whiff of it back in the late 1990s, during the Asian financial crisis. From Thailand and Indonesia to South Korea and Taiwan, China was widely thought to be next. An October 1998 cover story in The Economist, vividly illustrated by a Chinese junk getting sucked into a powerful whirlpool, said it all.

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Yet nothing could have been further from the truth. When the dust settled on the virulent pan-regional contagion, the Chinese economy had barely skipped a beat. Real GDP growth slowed temporarily, to 7.7% in 1998-1999, before reaccelerating to 10.3% in the subsequent decade.

China’s resilience during the Great Financial Crisis was equally telling. In the midst of the worst global contraction since the 1930s, the Chinese economy still expanded at a 9.4% average annual rate in 2008-2009. While down from the blistering, unsustainable 12.7% pace recorded during the three years prior to the crisis, this represented only a modest shortfall from the 30-year post-1980 trend of 10%. Indeed, were it not for China’s resilience in the depths of the recent crisis, world GDP would not have contracted by 0.1% in 2009, but would have plunged by 1.3% – the sharpest decline in global activity of the post-World War II era.

The latest bout of pessimism over the Chinese economy has focused on the twin headwinds of deleveraging and a related tightening of the property market – in essence, a Japanese-like stagnation. Once more, the Western lens is out of focus. Like Japan, China is a high-saving economy that owes its mounting debt largely to itself. Yet, if anything, China has more of a cushion than Japan to avoid sustainability problems.

According to the International Monetary Fund, China’s national savings is likely to hit 45% of GDP in 2017, well above Japan’s 28% saving rate. Just as Japan, with its gross government debt at 239% of GDP, has been able to sidestep a sovereign debt crisis, China, with its far larger saving cushion and much smaller sovereign debt burden (49% of GDP), is in much better shape to avoid such an implosion.

To be sure, there can be no mistaking China’s mounting corporate debt problem – with non- financial debt-to-GDP ratios hitting an estimated 157% of GDP in late 2016 (versus 102% in late 2008). This makes the imperatives of state-owned enterprise reform, where the bulk of rising indebtedness has been concentrated, all the more essential in the years ahead.

Moreover, there is always good reason to worry about the Chinese property market. After all, a rising middle class needs affordable housing. With the urban share of China’s population rising from less than 20% in 1980 to more than 56% in 2016 – and most likely headed to 70% by 2030 – this is no trivial consideration.

But this means that Chinese property markets – unlike those of other fully urbanized major economies – enjoy ample support from the demand side, with the urban population likely to remain on a 1-2% annualized growth trajectory over the next 10-15 years. With Chinese home prices up nearly 50% since 2005 – nearly five times the global norm (according to the Bank for International Settlements and IMF global housing watch) – affordability is obviously a legitimate concern. The challenge for China is to manage prudently the growth in housing supply needed to satisfy the demand requirements of urbanization, without fostering excessive speculation and dangerous asset bubbles.

Meanwhile the Chinese economy is also drawing support from strong sources of cyclical resilience in early 2017. The 11.3% year-on-year gain in exports recorded in June stands in sharp contrast with earlier years, which were adversely affected by a weaker post-crisis global recovery. Similarly, 10% annualized gains in inflation-adjusted retail sales through mid-2017 – about 45% faster than the 6.9% pace of overall GDP growth – reflect impressive growth in household incomes and the increasingly powerful (and possibly under-reported) impetus of e-commerce.

Pessimists have long viewed the Chinese economy as they view their own economies – repeating a classic mistake that Yale historian Jonathan Spence’s seminal assessment warned of many years ago. The asset bubbles that broke Japan and the United States are widely presumed to pose the same threat in China. Likewise, China’s recent binge of debt-intensive economic growth is expected to have the same consequences as such episodes elsewhere.

Forecasters find it difficult to resist superimposing the outcomes in major crisis-battered developed economies on China. That has been the wrong approach in the past; it is wrong again today.

Trump’s enfeebled America stands alone

July 20, 2017

Trump’s enfeebled America stands alone

Economic change has affected other countries, but they have managed globalisation

by Martin Sanbu@www.ft.com

Image result for Trump Go it Alone Foreign PolicyDonald Trump with his Foreign Policy Novice, SIL Jared Kushner

The US President used to be thought of as the leader of the free world. America’s western friends are finding that they can no longer rely on it. But the truly transforming change is that they may find they no longer need to — and that the US needs the world more than the other way around.–Martin Sandbu

The greatest challenge posed by Donald Trump’s presidency is not that he will deploy American strength against the global common good. It is that he demonstrates how weak the US has become.

Recall Mr Trump’s inaugural address. The phrase that has resounded around the world is “America first”. But the more significant phrase he used is that other, more inward-looking one: “American carnage”. What sort of country describes itself, in the words of its highest leader no less, in such terms? Not one that feels strong.

Some Americans may not recognise the dystopian conditions his speech described. But a large group surely does. American decline is not a figment of Mr Trump’s imagination. The US economy has left large numbers of people with stagnant wages for decades. It is an economy in which millions fewer people have a job than at the peak in 2000, and which still leaves tens of millions without secure, decent healthcare.

It is an economy dotted with towns that were thriving within living memory, but have been devastated by the loss of factory jobs — lost because automation made plants too productive to need as much human labour as before, or because a failure to automate made them uncompetitive against rivals.

Above all, it is an economy in which centuries-old progress against mortality has gone in reverse for middle-aged low-educated Americans, who are dying from the afflictions of broken lives and broken communities: drug overdoses, liver disease and suicide.

Deep economic change has affected other advanced economies too. But others have not let globalisation get in the way of managing it. The US is weak not because it has uniquely been cheated out of a golden age of factory jobs by foreigners, but because it has failed to create a prosperous new future for all at home.

Mr Trump’s railing against Washington is therefore not without foundation. Economic dysfunction has long been matched by glaringly inadequate governance. The devastation of the global financial crisis — which was at its core a US financial crisis, unsuspected by its regulatory system — followed the gross incompetence of the George W Bush administration’s handling of Hurricane Katrina and its adventurism in Iraq.

Mr Trump’s speech in Poland before the G20 summit was the international version of his American carnage speech. Just like the US, in his telling, is a landscape of decay at the mercy of corrupt leaders, he presented the western world as mortally threatened by destructive forces because of decadence within.

But while he may be a fiery prophet of US decline, he is wrong about the wider world. If other western countries display a quiet confidence vis-à-vis Mr Trump, it is because they have reason to. Their unrepentant globalism is striking. Canada’s reconsecration of its globalist destiny matches its ambitious welcome of refugees. Europe and Japan are creating one of the world’s largest free trade areas. The EU vows not to withdraw from globalisation but to shape it to its values of solidarity. Japan is leading the other spurned partners from the Trans-Pacific Partnership Mr Trump has pulled out of, in an effort to complete trade liberalisation without US participation.

What lessons can we draw from this contrast? First, take the theatrics of populism seriously. Populism paradoxically mixes machismo with an incessant focus on weakness — but blames weakness on elements that must be expelled, allowing the true representatives of the forgotten people a free hand.

Image result for Macron and Merkel

A revitalised Franco-German Partnership for a Strong EU–Macron and Merkel

Second, this worsens the problem populists promise to solve. It deepens existing divisions and paralyses democratic politics. For aspiring totalitarians that may be part of a plan. For others, it is simply a self-fulfilling prophecy. Look no further than Britain for a nation that has acted on a mistaken belief that its strength has been sapped by the global liberal order (in the form of the EU), only to throw itself into true political disarray and indecision.

Third, the clash between populism and globalism is theatrical all right, but it is a theatre of the grotesque that expresses reality by transmogrifying it. Those who most try to project strength are those with the most domestic weakness to hide. Leaders of harmonious countries have no need to brag.

Fourth, it is in countries where US-style social and economic decay is most visible that the global liberal order is most contested: above all the UK, but also France and Italy. The rest of the west must redouble efforts to improve the social protections that have kept decay at bay for now.

Germany is of particular importance: its labour reforms 15 years ago have produced a worrying increase in inequality and precarious work. It must not repeat the US’s mistakes.

Finally, the global liberal order is more than the US. Its remaining supporters aim to carry on by forging the unity of purpose collectively that the US cannot even muster at home. A few decades ago that would have been unthinkable. Today, it may just be true that US isolationism will most harm the US itself.

The US President used to be thought of as the leader of the free world. America’s western friends are finding that they can no longer rely on it. But the truly transforming change is that they may find they no longer need to — and that the US needs the world more than the other way around.


Promises and Pitfalls of the Belt and Road Initiative

July 20, 2017

Asia Pacific Bulletin
Number 388 | July 19, 2017

Promises and Pitfalls of the Belt and Road Initiative

By Bipul Chatterjee and Saurabh Kumar

China’s signature economic and foreign policy project – the ‘Belt and Road Initiative’ (BRI), also known as ‘One Belt, One Road’ (OBOR) – is the most ambitious global connectivity project ever launched by China or any country. The project aims to connect 65 Asian, African, and European countries comprising two-thirds of world’s population, through various sub-projects. The estimated investment cost for realizing this project is $4-8 trillion.

The goal of BRI is to connect China with Asia, Europe, and Africa through a network of railways, highways, oil and gas pipelines, fiber-optic lines, electrical grids and power plants, seaports and airports, logistics hubs, and free trade zones.

The promise of BRI

First, a promising aspect of this initiative is the potential reduction in transportation costs which would reduce the price of trade more broadly. At a time when countries are looking for specific measures to reduce trade costs and shying away from free trade agreements, a reduction in transportation costs as a substitute for trade deals can effectively widen the volume of international trade. A Bruegel study pointed out that a 10% reduction in railway and maritime costs can increase trade as much as 2%, while the effects of a reduction in tariffs would take a much longer time to be felt. An Asian Development Bank and Purdue University study estimated that improvements in transport networks as well as trade facilitation measures could increase the gross domestic product (GDP) by 0.3 % for India and 0.7 % for the South Asian region as a whole.

Second, BRI presents huge business opportunities for companies engaged in infrastructure development. A total of over $900 billion is expected to be invested in roads, ports, pipelines and other infrastructure as part of the project. This could immensely benefit countries suffering from inadequate infrastructure for their economic development.

Third, from the point of view of trade facilitation there are a number of factors that will create dynamic effects. China may accrue significant long-term trade benefits if it reduces tariffs through free trade zones, particularly on products from BRI countries. Beijing is also expected to reduce some of the non-tariff barriers hampering the prospects of foreign firms doing business in China including in those emerging areas such as internet banking and electronic commerce.

Potential Implications

Apart from the sheer number of participating countries, BRI appears to be both economic and strategic in nature. This became visible during the recently held Belt and Road Forum for International Cooperation in Beijing. The initiative came under scrutiny after European Union officials voiced apprehensions over transparency, labor, and environmental standards. This resulted in the EU’s refusal to endorse a trade statement tied to BRI. India’s non-participation due to sovereignty issues relating to the China-Pakistan Economic Corridor passing through part of Jammu and Kashmir also served as a serious dampener.

Even though BRI seeks to create trade infrastructure around India, it also encircles the country by creating a ring through land and sea routes passing through several countries with which India has sensitive relationships. However, India – with around 90% of its international trade through maritime routes and only 10% by rail and road – is comparatively less likely to see much benefit through enhanced connectivity under the initiative. Most of India’s maritime trade occurs from its western ports located in Arabian Sea and via land routes within the Bangladesh-Bhutan-India-Nepal network.

In presenting BRI, China appears to be unaccommodating with respect to political and diplomatic issues as well as economic concerns. Trade facilitation alone cannot drive trade flow upward. There needs to be smart and secure management of trade routes so that end-to-end supply and value chain networks can be strengthened. In recent times, piracy has emerged as a major potential threat for railways and highways as well as maritime routes. BRI does not address these challenges in a meaningful way.

Although the project was launched around four years ago, it suffers from a lack of key information, operational strategy, terms of reference, and detailed work plan for the role of partner countries. This has eroded trust.

The Next Steps

While it is true that China’s economic and strategic interests are intertwined, it would have been beneficial for the BRI to be planned more holistically in order to give due consideration to the economic and political interests of other participating countries. For a large project like BRI, an international governance structure involving all the participating countries to institutionalize objectives and safeguard the interests of participants has to be established now with a particular emphasis on financial mechanism. The decision-making structure for the execution of BRI should be based on consensus.

“While it is true that China’s economic and strategic interests are intertwined, it would have been beneficial for the BRI to be planned more holistically in order to give due consideration to the economic and political interests of other participating countries.”

Several sub-projects of various Chinese companies to receive political and financial support from the Chinese government are being touted as part of this initiative but have nothing to do with it and should be de-coupled so that ambiguity can be cleared and only official BRI projects can be materialized. Participating countries should also get equal treatment in the financing of BRI, so that they can also reap the long-term benefits of the project, a step in this direction could be the revamping of the New Development Bank. A clear operational strategy for the entire project with an economic and political matrix should now be made to increase trust and transparency. This should clearly indicate relative as well as absolute potential losses and gains of participating countries. Active participation of global institutions such as the United Nations, the International Court of Arbitration, and International Court of Justice should be included for reliability as well as to resolve a potential dispute.

BRI should be executed in a selective manner with focus on economically viable sub-projects developing trade and economic corridors, for example a Bangladesh-China-India-Myanmar Corridor in the case of South Asia.

About the Authors

Bipul Chatterjee and Saurabh Kumar are Executive Director and Policy Analyst, respectively, at CUTS International. They can be contacted at bc@cuts.org and sbk@cuts.org.

The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.

Established by the US Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options.

The Asia Pacific Bulletin (APB) series is produced by the East-West Center in Washington.

APB Series Editor: Dr. Satu Limaye, Director, East-West Center in Washington
APB Series Coordinator: Peter Valente, Project Assistant, East-West Center in Washington

The views expressed in this publication are those of the authors and do not necessarily reflect the policy or position of the East-West Center or any organization with which the author is affiliated.

For comments/responses on APB issues or article submissions, please contact washington@eastwestcenter.org.

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A New Course for Economic Liberalism

July 17, 2017

A New Course for Economic Liberalism

by Sebastian Buckup

Sebastian Buckup is Head of Programming at the World Economic Forum.

How policymakers can manage the opposing forces of economic diffusion and concentration.

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The New Man in France–President Emmanuel Macron

Since the Agrarian Revolution, technological progress has always fueled opposing forces of diffusion and concentration. Diffusion occurs as old powers and privileges corrode; concentration occurs as the power and reach of those who control new capabilities expands. The so-called Fourth Industrial Revolution will be no exception in this regard.

Already, the tension between diffusion and concentration is intensifying at all levels of the economy. Throughout the 1990s and early 2000s, trade grew twice as fast as GDP, lifting hundreds of millions out of poverty. Thanks to the globalization of capital and knowledge, countries were able to shift resources to more productive and higher-paying sectors. All of this contributed to the diffusion of market power.

Résultat de recherche d'images pour "Opposing forces of economic diffusion and concentration"

But this diffusion occurred in parallel with an equally stark concentration. At the sectoral level, a couple of key industries – most notably, finance and information technology – secured a growing share of profits. In the United States, for example, the financial sector generates just 4% of employment, but accounts for more than 25% of corporate profits. And half of US companies that generate profits of 25% or more are tech firms.

The same has occurred at the organizational level. The most profitable 10% of US businesses are eight times more profitable than the average firm. In the 1990s, the multiple was only three.

Such concentration effects go a long way toward explaining rising economic inequality. Research by Cesar Hidalgo and his colleagues at MIT reveals that, in countries where sectoral concentration has declined in recent decades, such as South Korea, income inequality has fallen. In those where sectoral concentration has intensified, such as Norway, inequality has risen.

A similar trend can be seen at the organizational level. A recent study by Erling Bath, Alex Bryson, James Davis, and Richard Freeman showed that the diffusion of individual pay since the 1970s is associated with pay differences between, not within, companies. The Stanford economists Nicholas Bloom and David Price confirmed this finding, and argue that virtually the entire increase in income inequality in the US is rooted in the growing gap in average wages paid by firms.

Such outcomes are the result not just of inevitable structural shifts, but also of decisions about how to handle those shifts. In the late 1970s, as neoliberalism took hold, policymakers became less concerned about big firms converting profits into political influence, and instead worried that governments were protecting uncompetitive companies.

With this in mind, policymakers began to dismantle the economic rules and regulations that had been implemented after the Great Depression, and encouraged vertical and horizontal mergers. These decisions played a major role in enabling a new wave of globalization, which increasingly diffused growth and wealth across countries, but also laid the groundwork for the concentration of income and wealth within countries.

The growing “platform economy” is a case in point. In China, the e-commerce giant Alibaba is leading a massive effort to connect rural areas to national and global markets, including through its consumer-to-consumer platform Taobao. That effort entails substantial diffusion: in more than 1,000 rural Chinese communities – so-called “Taobao Villages” – over 10% of the population now makes a living by selling products on Taobao. But, as Alibaba helps to build an inclusive economy comprising millions of mini-multinationals, it is also expanding its own market power.

Policymakers now need a new approach that resists excessive concentration, which may create efficiency gains, but also allows firms to hoard profits and invest less. Of course, Joseph Schumpeter famously argued that one need not worry too much about monopoly rents, because competition would quickly erase the advantage. But corporate performance in recent decades paints a different picture: 80% of the firms that made a return of 25% or more in 2003 were still doing so ten years later. (In the 1990s, that share stood at about 50%.)

To counter such concentration, policymakers should, first, implement smarter competition laws that focus not only on market share or pricing power, but also on the many forms of rent extraction, from copyright and patent rules that allow incumbents to cash in on old discoveries to the misuse of network centrality. The question is not “how big is too big,” but how to differentiate between “good” and “bad” bigness. The answer hinges on the balance businesses strike between value capture and creation.

Moreover, policymakers need to make it easier for startups to scale up. A vibrant entrepreneurial ecosystem remains the most effective antidote to rent extraction. Digital ledger technologies, for instance, have the potential to curb the power of large oligopolies more effectively than heavy-handed policy interventions. Yet economies must not rely on markets alone to bring about the “churn” that capitalism so badly needs. Indeed, even as policymakers pay lip service to entrepreneurship, the number of startups has declined in many advanced economies.

Finally, policymakers must move beyond the neoliberal conceit that those who work hard and play by the rules are those who will rise. After all, the flipside of that perspective, which rests on a fundamental belief in the equalizing effect of the market, is what Michael Sandel calls our “meritocratic hubris”: the misguided idea that success (and failure) is up to us alone.

This implies that investments in education and skills training, while necessary, will not be sufficient to reduce inequality. Policies that tackle structural biases head-on – from minimum wages to, potentially, universal basic income schemes – are also needed.

Neoliberal economics has reached a breaking point, causing the traditional left-right political divide to be replaced by a different split: between those seeking forms of growth that are less inclined toward extreme concentration and those who want to end concentration by closing open markets and societies. Both sides challenge the old orthodoxies; but while one seeks to remove the “neo” from neoliberalism, the other seeks to dismantle liberalism altogether.

The neoliberal age had its day. It is time to define what comes next.