Rebalancing China With New Economic Patriotism

>> Michael McFaul: Good afternoon everyone? My name is Michael McFaul. I'm a professor of political science here at Stanford. I'm also the director of the Freeman Spogli Institute for International Studies and a senior fellow here at the Hoover Institution. Thank you all for joining us in person, and thank you all for joining us live stream back there in the corner.

Representing both Hoover and FSI, Amy Zegart and I are very excited to co host Congressman Ro Khanna today, where he's gonna share his proposal for, quote, a new economic patriotism, unquote, as a strategy to restore American manufacturing and technology leadership, and at the same time, rebalance our relationship with China.

After some opening remarks from Congressman Khanna, Amy Zegart and I will join him in a discussion. I said it's gonna be a discussion between three. I think it should be between two. But I'll sure, I'll have a few things to say. I say that because Amy here, who is also a senior fellow at Hoover, she's also a senior fellow at FSI.

She's also a professor of political science, runs a lot of our programs on technology and national security, and she is also the author, most recently, of Spies, Lies, and Algorithms. What a fantastic title. So following our conversation, we'll then turn to you. I'm sure most of you know Congressman Khanna represents California's 17th congressional district here in the heart of Silicon Valley, just down to the south here.

Yes, fantastic. We love the 17th too. He serves on, and this is a long list, the House Armed Services Committee, as a ranking member of the Subcommittee on Cyber Innovative Technologies and Information systems. Co-chair of the Congressional Caucus on India and Indian Americans, a member of the select committee on the strategic competition between the United States and the Chinese Communist Party, and on the oversight, an accountability committees, where he previously chaired the environmental subcommittee.

He's a very active guy. He's also authored the Endless Frontier Act, which formed the basis for the CHIPS and Science Act that is investing 280 billion to strengthen supply chains and US leadership in semiconductors, nanotechnology, clean energy, quantum computing and artificial intelligence, all which benefits his district, by the way, I might add.

And he's currently co-sponsoring the National Development Strategy and Coordination Act with Senator Marco Rubio, which seeks to rebuild critical industries in the US through greater strategic coordination among federal finance programs. Representative Khanna is also the author of two books, Entrepreneurial Nation: Why Manufacturing is Still Key to America's Future, and Dignity in a Digital Age, where we had a tremendously interesting and engaging conversation about this book the last time I was hosting you here on campus.

It's still available on Amazon right now. He's a very busy guy, and that's exactly what we want in our members of Congress, to be busy like this. And I know he just got back from Taiwan, we were just talking about as well. So please welcome with me Congressman Ro Khanna.

>> Ro Khanna: Thank you so much Ambassador McFaul and Dr. Zegart. Thank you for hosting me. I'm reminded with Ambassador McFaul hawking my book that we were in a meeting with Speaker Pelosi and the German chancellor, halfway through the meeting starts going on about some book he had written about Germany being a multiracial democracy.

And his aide interrupts him and he says, you're chancellor of Germany and you're still hawking your books? So it never ends. But I appreciate it. And I appreciate, Ambassador McFaul, your leadership in standing with the people of Ukraine and being such a voice. Let's give him a round of applause.

>> Ro Khanna: And Dr. Zegart, I appreciate your leadership on so many matters of the intelligence community and being a resource and asset to our country. Thank you, let's give Dr. Zegart a round of applause.

>> Ro Khanna: Now, it's good to be back at Stanford. I used to teach economics here.

One of my former students, Geo Saba, is now my chief of staff, and he's been helpful in helping me write this speech. So you can be the judge if Stanford graduates can outcompete GTP. Our nation's foreign policy must aspire to help create a world at peace while affirming the values of self-determination, respect for sovereignty, and human liberty.

Today's China debate, dominated by discussions of war games and winning a new cold war, clouds that vision of working towards peace. There is nothing weak about peace. A just and lasting peace is the highest ideal for a people who believe as we do, that every human being is endowed by their creator with dignity and basic rights.

As a famous American statesman once said, let us examine our attitude towards peace itself. Too many of us think it is impossible. Too many think it unreal. But that is a dangerous, defeatist belief. To see conflict as inevitable, accommodation as impossible, and communicating is nothing more than an exchange of threats.

That was President John F Kennedy in his famous American commencement speech in 1963 during the height of the Cold War. Kennedy was speaking about the Soviet Union. But his words stand the test of time, and we can draw inspiration from some of his insights to the situation and our approach to China.

Today, we need a constructive rebalancing with China. This requires us to be clear-eyed about the threats we and our allies face in Asia, but hopeful that our diplomacy and statesmanship can make the 21st century less bloody than the 20th century. There are four guiding principles to a constructive rebalancing with China.

First, an economic reset to reduce trade deficits and tensions. Second, open lines of communication. Third, effective military deterrence, and fourth, respect for our Asian partners and robust economic engagement with the world. Now, I chose Stanford not just because I taught here, but it is here in the heart of Silicon Valley that we can begin to achieve such a vision.

We have the technology to bring about an American production renaissance, as Andy Grove had suggested back in 2010 was necessary. We have an Asian-American diaspora here that understands the need for open lines of communications and exchanges with Asia. The valley and Stanford itself is pioneering in leading on AI, cyberspace, long range missiles and unmanned vehicles that will be essential for deterrence in the Taiwan Straits.

And we have a Business community that understands the importance of engagement, not isolation, and that that is how we make friends around the world, especially in the global stealth and stand up for American values. The first pillar of a modern strategy in China is to have an economic reset.

In the 1990s, many believed that China's economic liberalization would lead to an open society and democracy in China. Yes, we should be honest, some parts of Chinese society have liberalized. Citizens can marry in China who they love, even from different classes, and don't need their parents permission to choose their profession.

And yes, we have seen significant improvement in the standard of living and purchasing power for the Chinese people, probably a 50 fold increase since the 1970s. Larry Summers has said, historically, it will be one of the most significant economic facts when people look back at this period. But the dreams of political liberalization evaporated and repression and surveillance are widespread.

In 2013, Singapore's founder, Lee Kuan Yew, expressed skepticism that China would ever become a liberal democracy, suggesting then that if it did, it would collapse. But even he couldn't have predicted the path that Xi Jinping has taken. The Xi Jinpings new third term and the removal of term limits has solidified his power.

He and the CCP have unfortunately turned China into an authoritarian surveillance state which violates human rights. They aim to wipe away the cultures of the Tibetans and Uyghurs and suppress promised freedom in Hong Kong. Our economists and policymakers also underestimated the negative consequences of unfettered globalism and the impact that the opening of China would have on America.

It ravaged our heartland as production moved to China. Last year alone, the trade deficit amounted to $382 billion, in the 1980s, that number was only 6 billion. Since the turn of the century, nearly 70,000 American factories have shut down. When I was in Anderson, Indiana, Fred Davis came up to me with a binder documenting 70 to 100 factories that had shut down just in his community.

He said, Congressman, show this binder to everyone in Congress. The loss of jobs have contributed to social unrest and political polarization. We've seen the rise of divorces and overdoses and fall of paychecks and life expectancies. The hollowing out of society has created resentment against China as Americans, too many Americans, saw their father's jobs shipped there.

Americans have also begun to ask why we don't make basic goods here anymore. The pandemic exposed that reality. We didn't make masks here, we didn't make Tylenol to keep up with the demand. We didn't make semiconductors and our cars were lying idle in parking lots. We didn't even make enough baby formula.

In hindsight, America made a colossal mistake by offshoring so many of our jobs and our manufacturing capability. We need a production renaissance to become a manufacturing superpower again. A new economic patriotism must be front and center in our diplomacy with China. In our bilateral negotiations, we should set a target to reduce the trade deficit with China every year until it is.

To rebalance the trade deficit, we need to create a national development council to provide federal financing so our critical factories will scale. That is, funding that simply isn't available by Sequoia and Kleiner, you need of federal financing for many of these factories. As Ambassador McFaul pointed out, I wrote a bill with Marco Rubio that would do just that.

Rebalancing trade also requires properly investing the $280 billion in the Chips and Science act, which I also co authored. And it requires new chips acts for aluminum, for steel, for paper, for microelectronics, for advanced auto parts, and for climate technologies. To succeed, we'll need expedited permitting for national projects conditional on companies paying a prevailing wage, meeting environmental standards, and not engaging in stock buybacks.

We also need a currency accord with China to prevent Chinese manipulation, like President Reagan did with Japan and Germany in the 1980s. The unlevel playing field with China has decimated industries like steel. We used to make 20% of the world's steel, now it's down to just 4%. We lack enough steel to make the next generation of steel products, whether that is solar panels or windmills.

It's simply too difficult to compete on large scale products against dumped and subsidized products from China. To bring industries like steel back, we need to impose countervailing duties, targeted tariffs, and buy American provisions to provide a robust customer base or those jobs simply won't come back. We also need to push China to buy more American pork, soybean, and corn, to watch more of our movies, to have a more reciprocal trade relationship.

At the same time, we need to demand that the CCP play by the same rules as we do. When the PRC joined the World Trade Organization, it voluntarily agreed to market oriented principles in upholding basic human rights. Instead, the CCP distorts markets with blanket subsidies, illegal dumping, intellectual property theft, and currency manipulation.

The US needs to work with our allies to pursue a broad WTO dispute settlement case against China. One hurdle is that the current process doesn't adequately litigate a lot of China's activities. The reason is that we need new rules. For starters, the World Trade Organization must consider abolishing its specificity policy under the current rules, and I didn't know this actually until I was in Congress.

The World Trade Organization allows countries like China to support state sponsored enterprises and provide widespread subsidies to its economy. The WTO should stop letting its members do this. We must also be open to suspending China's most permanent nation China's permanent normal trade relations with the US, which was previously called the most favored nation status.

Prior to joining the WTO, US law required China's NTR status to be renewed annually. This status is a privilege, and the US should decide this status annually. If China does not support a constructive rebalancing of our economic relationship, we should eliminate or suspend this status now. These are tools they hopefully don't have to be used if China recognizes its own long term economic interest.

The truth is that resetting our economic relationship will also benefit China. Xi Jinping and the CCP may be hesitant with the rebalancing at first. We like to procrastinate, and they don't wanna see factories just leave. But they cannot be dependent on only export oriented production and expect to emerge as a preeminent economy.

They need domestic production to meet the needs of their growing middle class, especially given the ramifications of China's one child policy where they already have a production labor shortage in the horizon. Ji Jinping and the CCP know they also need service jobs and tech and finance to produce modern wealth.

I don't have to tell you that here at Stanford. Think about the wealth here in Silicon Valley in New York and a service industry to improve the quality of life for their residents. Diversification is in China's long-term economic interest as it aspires to become a highly developed economy.

So the vision of rebalancing trade with China is not a call for decoupling or autarky. It recognizes the complexity of global supply chains and the value of China's export market. But it calls for an end to our unhealthy dependence on cheap labor from China and for both countries to develop a fuller, more robust development strategy while continuing to engage each other.

This approach of recalibrating trade can reduce tensions. Even China's foreign Minister Quin Gang acknowledged this. When he was ambassador, he explained to me that the trade deficit between China and Britain created the conditions for the opium wars. In the 19th century, Britain ran a major trade deficit with China.

The British bought tea, silk, porcelain, but they lacked exports because the Chinese didn't want to buy their wool. To reduce the imbalance, Britain turned to selling opium in China by way of their newly acquired territory in Bengal. Not wanting to return to a trade deficit with China after the emperor banned the imports, Britain started the opium wars.

Now no one can defend the morally wrong actions of Britain. My family will be the first to tell you about the evils of british colonialism, considering my grandfather spent time in jail as part of Gandhi's independence movement. But I share this bit of history to highlight that trade imbalances can aggravate.

All right, I wanted to emphasize that point.

>> Ro Khanna: My staff tells me I told my grandfather way too much anyway, but I'm inspired by him. But I share this bit of history to highlight that trade imbalances can aggravate the environment of war. When we reduce trade deficits, when we bring jobs home, we reduce the anger and vitriol dominating the China conversation.

This can help pave the way for less inflamed rhetoric. Now, economic rebalancing is not enough. This was made clear to me last week when the China Select Committee on which I serve participated in the Taiwan war game. This exercise demonstrated that a military conflict with China would be catastrophic for America, both in terms of the loss of life and the economic devastation and for all of humanity.

We are called to do everything in our power to prevent this war. During the war game, we were told that all communication between the United States and the PRC government and militaries ceased. We must work hard now to establish strong norms around government to government and military to military communication.

This type of communication was common even during the Cold War's hottest moments. It was troubling when earlier this year, China did not pick up the phone during the spy balloon incident when our military called. We must, in all our engagements with China, emphasize the importance of open lines of communication even during trying times.

If conflict were to break out, we would need to stay in constant communication to deescalate the situation and especially to avoid nuclear catastrophe. In addition to government and military lines of communication, we must make use of our relationships that business leaders have. Exporting low tech goods like Mickey Mouse helps establish a floor for at least having some relationship with the chinese people.

If communication between our governments were to stall, business leaders like Bob Iger could play a role in being intermediaries. Iger has been to China over 40 times since he has been CEO. He was too polite to ask the China Select Committee how many times we've been to China, but my guess is that's more visits than most sitting members of Congress combined.

Indeed, there hasn't been a congressional delegation to the PRC in over three years. I've committed to lead one later this term in coordination with our State Department, and we will have many difficult conversations. That is what diplomacy is about, and I am not naive about China's intentions. But to avoid the risk of war and to reduce tensions, it is in both of our interests to talk to each other.

We must talk also about international climate cooperation. Our governments, industries and national governments must coordinate. Without meaningful action from China, we simply cannot solve the climate crisis. Talking with China does not mean we turn a blind eye to their escalating threats in the Taiwan Strait. We must have effective deterrence to ensure that China's leadership recognizes that any war would be catastrophic.

We must make the potential costs so high and obvious that war remains a game reserved only for think tanks in Washington and Beijing to play. We can deter Xi Jinping from militarily invading or blockading Taiwan. But the situation is becoming more urgent by the day. Today, we can thwart an unprovoked invasion or blockade.

I heard this directly from our Indopacom commander, Admiral Aquilino at an Armed Services hearing that I was at last week. We have naval superiority and capability to shoot down Chinese ships crossing the line of control. Ji Jinping knows this won't be an easy operation. The waters of the Taiwan Strait are treacherous, and the beaches for an amphibious landing are limited.

He also knows there can be severe consequences if the CCP chooses conflict. As an example, we can restrict their oil by shutting down the Strait of Hormuz with our Fifth Fleet. And we can kick them off the SWIFT banking system and sanction all CCP entities. Despite this assessment, it would be wrong and naive for us to be complacent.

We must continue to rapidly build our capacity as the PLA builds their navy, and we need to provide Taiwan with defensive capability. We must do so with utmost urgency, not waiting until the end of the decade as some policymakers want. But we need to do so now so we don't leave Xi Jinping with room to mistakenly believe he can exploit any vulnerability stemming from our presidential elections.

For starters, we need more munitions in the Pacific. We need submarines and ships with plenty of munitions to destroy PLA ships without having to travel back to Guam and Hawaii to resupply. We also need artificial intelligence for surveillance and reconnaissance, naval sea mines to make it harder for PLA ships to invade, cybersecurity to prevent the PLA from jamming our communication systems, and enough long range missiles to hit fleets of moving PLA ships if they were to cross the Taiwan Strait.

Then there's the matter of Taiwan's defense capability. As ambassador McFaul pointed out, I led a congressional delegation to Taiwan earlier this year, where we met with the Taiwan defense minister. After witnessing the resilience of Ukrainians, he is now more open to acquiring asymmetric capabilities and employing the so-called porcupine strategy.

This means acquiring smaller and more mobile weapons, such as drone swarms, sea mines, stingers, javelins, and, of course, the HIMARS to confront a Chinese attack against Taiwan. Because of Putin's war in Ukraine, there is a worrisome backlog for these weapons. Because Taiwan lacks the munitions they need, the US should invoke the Defense Production Act to build more and move Taiwan up the priority list.

There simply isn't time to waste. We must quickly move past the concentrated big five prime defense contractors, and build a more resilient and competitive defense industrial base. How will we help defend Taiwan if we can barely keep up with the needs of Ukraine? And unlike Ukraine, it's much harder to provide weapons to Taiwan once a conflict begins.

Our anemic domestic manufacturing is a national security threat. We won World War II not just because of the brave men and women who fought in the armed forces or were at the factories. We won because we had twice the output of Germany and Japan. During the Cold War, we had contingency plans to mobilize manufacturing hubs like Detroit.

But now, our industrial base has gone offshore. Our industrial defense weakness stems not from a lack of spending. People here who follow me know that I have opposed Pentagon budgets that are headed to almost $1 trillion. I voted down many defense budgets during my time in Congress, and I'm sometimes the lone no vote in the House Armed Services.

I've supported higher troop pay and more tech education for veterans, but our endless wars and bloated Pentagon budgets make us weaker. What we need is reallocation. We can cut defense spending for weapons we no longer need. Now that we have the new B21 bomber, let's retire the B1B and save almost $8 billion.

We can save $80 billion by reducing the number of new F-35 acquisitions which have had cost overruns and technical problems. We don't need to have the GBSD missile system and can extend our Minutemen III ICBMs. And we can save money by not having the long-range standoff missile and using the more modern conventional cruise missile.

These are just a few examples. They would save almost $100 billion. Instead, we could invest that money in the emerging technologies that I outlined that are needed for Taiwan's defense and in a defense industrial base to have sufficient effective deterrence against China launching an invasion of Taiwan. This is a narrow, targeted mission, assisting in the defense of Taiwan, that leaders across the political spectrum, progressives like me, moderates and conservatives, should support.

I'm the lead Democrat on the House Armed Services Committee, along with Chairman Mike Gallagher. We're working to improve the DoD acquisition process to adopt emerging technology more easily. And we were just here last week or a few weeks ago to learn from Stanford and the work that's being done at the Hoover Institute at The Gordian Knot Center towards this goal.

Now, assisting Taiwan with a strong defense needs to be coupled with listening to Taiwanese leaders talk about their goals. As Ambassador McFaul knows well, given his leadership on the issue of Ukraine, there's a principle that states, nothing about Ukraine without Ukraine. We should extend that principle to Taiwan.

Nothing about Taiwan without Taiwan. What does that mean? When developing Taiwan policy, we must take into account the preferences of the Taiwanese people. Some things seem self-evident, but in Washington, sometimes self-evident things don't materializes policy. The Taiwanese people wanna keep the political freedoms they enjoy. They wanna have good wages and keep 40% of their exports flowing into China.

They want to keep universal healthcare in good schools. And most importantly, they wanna keep the peace. During my trip to Taiwan, we met with President Tsai and also the leadership of the KM and members of Taiwan's People's Party. All three major parties are converging to court the median voter for next year's presidential election.

They support the move from four to twelve-month conscription and a stronger Taiwanese national defense. They want, as I said earlier, for the US to quickly provide arms and to train their soldiers. But they also take pride that their governments know how to deal with the ups and downs of the CCP.

They prefer to keep the messy status quo and continue punting the unification issue into the future. So the United States should listen to Taiwan. We should help them with their defense and strengthen deterrence, but at the same time engage China and avoid provocative actions. During my visit, that's why I reaffirmed our one-China policy.

Instead of calling for Taiwanese independence, as has become popular for politicians to say, in hopes of sounding tough and making headway in the primary nomination fights. We should emphasize strategic ambiguity and do the hard work of statecraft with China that so many American diplomats of both parties have undertaken since we normalized relations with the PRC.

What would be the aim of engaging with China other than reducing the risk of war? Let's have an AI agreement on common sense regulations to keep humanity safe. Let's have a cyber arms agreement to keep our data and critical infrastructure safe. Even at the height of the Cold War, American and Soviet leaders like Nixon and Brezhnev, not to mention Reagan and Gorbachev, met and negotiated arms control agreements.

We may need to get the rest of the world on board first with these agreements before the Chinese come to the table. But if we do, we can get the Chinese to the table. And while the weapons of tomorrow deserve attention, the nuclear missiles of today also require attention and updated treaties.

For the sake of both peoples, we need to work with China on pandemic prevention, demanding far more transparency from the CCP. We will also need to draft treaties together to address the existential threats from global climate change. As important, we need to build alliances with India and other Asian partners, recognizing that they will not be satellite states and will march to their own drummer, more so than our NATO partners.

Given the history of colonialism and cultural pride of many Asian nations, we cannot expect to have a smooth lockstep and cohesive alignment as an Asian NATO. What we need is multipolarity in Asia and the denial of China as a hegemon. India will be a key partner in that effort.

As the new chair of the India Caucus, I'm hosting just this week a major summit on the US-India relationship to strengthen the defense, technology, and economic partnership. Secretary Mattis from Sanford will be participating. India's participation, Participation in the Quad, along with Japan and Australia, is critical for ensuring our partners work together to keep China from becoming a hegemon.

In the 1950s, China and India shared a common aspiration to see Asia emerge after western colonialism. But Nehru's vision of collaboration with China has soured. China creeps towards hegemony, threatens India's borders, and treats other countries as junior partners. The people of India now see China as their greatest military threat, not Pakistan.

Other countries in Southeast Asia, especially the Philippines and Vietnam, two countries who have mixed histories with our nation, are ready to work with us to prevent Chinese hegemony in Asia. We've also seen Japan take historic steps to build out its national security apparatus. As we work with our allies, we must treat them as partners and a people with their own identity, their own vision, and their own place in this world.

They won't be our junior partners, and we won't repeat some of the mistakes of the cold war. Where we too often use states as means to our larger goal without enough concern for their own aspirations. In continents like South America and Africa, we need to engage in more trade, not just aid.

Larry Summers shared that someone from a developing country recently told him, what we get from China is an airport. What we get from the United States is a lecture. We need to change that. Let's not adopt the predatory nature of the CCP's development strategy as a model. But America needs to offer an alternative, to offer better financial terms, better labor conditions, help with training a local workforce, so that these countries view us as a partner.

The genuine peace in all times that President Kennedy spoke of was not a Pax Americana enforced on the world by American weapons of war. Not the peace of the grave or the security of the slave. We simply cannot refashion societies abroad with our weapons of war, nor our economic treatises.

But we can inspire nations. Let us be confident in our values, but honest about our limitations. Our generation has this chance to make America the first cohesive, multiracial democracy in the world. Now, every time I say this, I get some tweet with the Canadians upset. But the figures are indisputable.

We're about 60% white, non-hispanic. Canada is about 80 some percent white. Britain, 80% white. Australia, 80% white. None of those countries have near the diversity that is springing forth in our cities and even small towns in every corner of this nation. The vision of a multiracial America will include people of all parts of the world, including China.

We will make sure Chinese Americans are free from NECCP police station surveillance and anti-Asian hate. Let us remember here. It was a Chinese American who kept humanity connected during the pandemic. Decades ago, Eric Wan moved from China to Silicon Valley and ultimately founded the technology company Zoom. Today, some are calling for a blanket expulsion of Chinese nationals from our companies, our classrooms and our neighborhoods.

They are the types who probably also want to ban books because they haven't read history. It is a profound mistake. We will win by putting our system and our promise of freedom on display for the world to see. Frederick Douglass addressed this very issue in 1869 when he defended Chinese immigration and articulated his vision for a multiracial democracy.

Think about that. This man, who had been enslaved for 20 years soon after abolition, takes up the cause for chinese immigrants. Douglass, in his speech, our composite nation, which I believe ranks up there with the Gettysburg Address and the great american speeches in history says that he wants America to be a home not only for the Negro, the mulatto and the latin races, but I want the Asian to find a home here in the United States and feel at home here, both for his sake and ours.

This composite nationality is what makes America America. It makes us different from China, Germany and India. Douglass argued that no race is perfect but that the whole of humanity is greater than the part he called for respecting China's 5000 year old culture and praised their contributions to civilization similar to what Kennedy did in his american university speech in praising the people and the civilization of the Soviet Union, I believe a constructive rebalancing with China can maintain the peace.

This rebalancing will help our own nation flourish and remain the beacon of the world. It will not happen overnight. It will not happen with one president or one congressman. But it will happen if all of us, military leaders, business leaders, foreign policy experts, academics, students like all of you seated here today work towards this goal.

Together, we can achieve an economic reset to reduce trade deficits and to reduce tension with China. Together with our nation's finest diplomats and our titans of industry, we can keep open the lines of communication. Together with our entrepreneurs and our brave men and women in uniform we can maintain an effective military deterrent that helps us avoid war.

Together with our global businesses and development institutions we can engage with nations around the world fairly and with respect. This is how we rebuild an America that secures peace and prosperity for our people and offers hope to other people around the world. Thank you very much.

>> Amy Zegart: Well, thank you so much, Congressman.

We're gonna sit down for a few minutes. We'll put Congressman Connor in the middle. We'll have a conversation, and then we'll open it up to questions from the audience and for students in the audience, I want to really encourage you to ask questions. Since all three of us have taught here at Stanford, we can call on you if you don't ask questions.

So I'm Amy Zegart, you heard a little bit about me. I'm most proud that I am former professor of Geosaba. Really inspiring to see our former students come back and work for such an inspirational leader at the forefront of american foreign policy. So, Congressman Connaught, I wanna start with you.

You laid out a very hopeful vision of the role of government in economic competitiveness and national security. But we see in the headlines of the paper today a different vision of the government. It's a government that can't avert a debt ceiling crisis. It's a government that can't get a budget passed every year.

And as you know, the failure to pass the budget means you can't get defense innovation cuz new programs can't start unless there's a new budget passed. It's a government that has, at times, invested in things like California high speed rail and Solyndra. And so they're wonderful examples of the promise of public financing.

COVID vaccine, SpaceX and Tesla, which you've written about, the CHIPS act. So how do you reconcile these two views of government. And how do we make sure that we get to the positive outcomes with chip sacks for aluminum and steel and other area. And avert the negative consequences that we've also seen in the past?

>> Ro Khanna: Well, the first point, it's an excellent question, is that nothing that I'd recommending is very new. This is how America built itself. This was Hamilton. This was FDR. I was in Indiana advocating for the making things in America, and someone told the journalists, I don't understand Ro Khanna, as a Democrat, I thought this was a Trump thing.

And I said, no, it was actually an FDR thing. Let's just remember what built the modern American factories. I mean, we had the private sector with federal financing, building enormous production capacities. And at the time, by the way, we had war nurseries, because where were the women who built all of our industry going to have the kids?

At the time they had the kids. We said, let's have childcare, universal child care. So I don't get all this debate about why do we have childcare now. We had universal childcare, and the model worked, by the way, they took away the universal childcare in the 1946 through 48 because people were opposed to women being in the workforce.

That's why. Not because of the cost of universal childcare. And California, I'm proud, fought the longest to keep those war nurseries. But alas, we lost, too. But my point is that the model is one that America invented. I'm just saying, let's do it now for the future. And we know we're capable as a government of doing big things.

The most recent example is that during Donald Trump's presidency and Joe Biden's presidency, despite political dysfunction, somehow we mobilized $5 trillion to have the best response on COVID in the world. Now, some could argue that that was inflationary, but the reality is, I would challenge you to name another government that had a more effective response.

And we also developed the vaccine so we know we can do it when there is crisis. What I am arguing is this lack of a production base, the lack of a manufacturing base is a crisis, and it should bring us together on this issue. And we've seen on the CHIPS Act and on the National Development Act, Rubio, other Republicans come around on this policy.

So I'm not saying we can have bipartisan solutions to all of the issues, or even many of the issues, but on this issue, this crisis, I think that there is possibility.

>> Amy Zegart: So I wanna bring Mike into the conversation. You both are involved in two issues, central issues to the United States, where there is bipartisan consensus, at least right now.

Russia's war in Ukraine, strategic competition with China, both really, really challenging foreign policy issues. Some people say the war in Ukraine is the hurricane. The challenge with China is climate change. One is urgent. The other is long term, even more serious. So I'd love to get your take, both of you and Mike, maybe we'll start with you.

In the next year, where do you think events are going? It's an unfair question, I know. And secondly, if you could advise the us government, you do advise the us government a lot to do one thing in Russia or with China, what would the one thing be?

>> Michael McFaul: So, Amy, you know, I'm on tv a lot, and when I don't like the question, I just give my own answer.

Cuz I-

>> Ro Khanna: I never do that.

>> Michael McFaul: Because those are really hard questions. I mean, I'll give a stab at it, but I wanna relate it to what you're talking about with Taiwan. One is, I don't know where things are gonna be in a year, and I don't trust anybody that predicts that.

They do. You and I know Bill Burns. He doesn't know either. He's the head of the CIA. President Biden doesn't know. Just speaking to the chief of staff to President Zelenskyy today. He doesn't know. And I think we need to be careful about assuming we can predict these things in the future.

I don't need to tell you, you work on this stuff. Intelligence is really good at figuring out certain kinds of facts that people like us in the unclassified world can't do. And I benefited tremendously when I was in the government. I would say we're both handicapped. And I know you've participated in these kinds of exercises, predicting long term future things about wars, revolution, democratization.

There was recently these leaked documents that says the IC and the intelligence community is predicting that there's gonna be a stalemate and it's gonna end in this way. Well, we also know what they predicted at the beginning of the war. And there are these variables that are really hard to predict, like will to fight and strategy that we can't capture.

So I don't know. I do think it's a critical year. And I'm just telling you things that Ukrainians say this is the critical year for two reasons. One, they are amassing capacities to make it a critical year. The counteroffensive, they want that to happen now because they don't think they can have it happen in 20.

242-025-2026 when they hear european and american leaders say, we're with you as long as it takes. The word they hear is long. They don't want a long war. They want a short war. And so I think this year is gonna be critical. Number one, I don't know what's going to happen, but what happens this year will be more important than years two, three and four out.

Number two, they're worried about us. They're worried about our Congress, that you represent us there. They're worried about that if there isn't a breakthrough in 2023, then support will wane in the west, and particularly in the United States. So they feel that pressure. That's why 2023 is so important.

But the part I wanted to add to your question was thinking about these two places together, and we were discussing, I was with a Hoover delegation. I see some of them in the room, an FSI delegation in Taiwan last summer. I think we also have to ask a question that you were hinting at in your speech, by the way, fantastic speech.

Whoever wrote that speech is really talented. Let me say that for the record.

>> Ro Khanna: It was Geo, with the help of all his Stanford professors.

>> Michael McFaul: That's funny. I mean, we're gonna only have time to digest pieces of that speech. That was a sweeping, really important statement that has a lot of content.

But one piece that you hinted at is we need to recognize the fact that we failed at deterrence last year. So we got a lot of intelligence things right. We did a lot of things right. I think we're doing a lot of things right now. We failed at that.

And that's one thing you asked about. I want to give two things. One thing we should do, study why that effort at deterrence failed, so that we don't fail with respect to Taiwan. I think we need to learn those lessons. And the one lesson you hinted at, I think we should get back to, is how we handled the economic deterrence piece, right?

We didn't announce ahead of time the sanctions we were gonna put in place. We didn't put together the sanctions coalition ahead of time. We did it afterwards. And I wonder, as a question we should chew on, is that something we might think about doing differently this time around?

The one thing I would do differently, Amy, if I were talking to the Biden administration, which I have the opportunity to do from time to time, is if 2023 is so critical, then do all that we can with respect to weapons and with respect to sanctions now, rather than what I see as sometimes an incremental approach.

I've been in this debate with the President of the United States and with his national security team since even before the war. And I'm always pleased that we finally get around to sending patriots. We finally get around to sending HIMARS. We're now getting around to sending the Abrams tanks.

But if we thought it was a good idea today, why didn't we do it ten or twelve or even 15 months before? And I think that's an important lesson that you hinted at in your speech, right? Get the munitions up front now, a, to help deterrence and b, to have it in place if God forbid, we have to deal with a military conflict in Asia.

>> Amy Zegart: So thank you for asking a better question than the one I asked.

>> Michael McFaul: No, no. Yours was too hard, so I had to defer.

>> Amy Zegart: Congressman Khan over to you.

>> Ro Khanna: Well, the first point on Ukraine, I would say, I would never venture a opinion different than both of yours.

If you don't know, certainly I don't have any intelligence information, public information, different. But I will say I know what I can do, and what I can do is to support the strong support of Ukraine and to support what Ambassador McFaul is saying, which is that we need to provide them with the weapons they need and provide them with the assistance they need this year, and that we need to make the case in Congress that you cannot appease a great power just marching in to another nation and taking that territory, that that's wrong.

And so while the United States can't control the outcome, it's not fully in our control. We can control our values. It's unfortunate to me that there's been some erosion of the bipartisanship. It's still strong. There's still about 300 or so members. But for those of us who support it, it's going to be important to continue to support it.

My voice, I think it'd be helpful from the progressive end to make sure that there's not an erosion of progressive support for the president to take action in supporting Ukraine. On the point about what we need to do, one thing, I think it's build our industrial base, and I'd start with the defense industrial base or national security sensitive industrial base.

I think a lot of policy with China. There is going to be, to Ambassador McFaul's point, thinking out how we have effective economic or military deterrence, figuring out how we avoid any invasion in the first place. But long term, I think a lot of our policy to China is going to be dependent on what we do here in America.

Are we going to build an effective manufacturing base? Are we going to invest in the leading technologies? Are we going to make sure that we emerge as a country that isn't as divided politically or economically? And so I would emphasize that economic development part.

>> Amy Zegart: Great. Thanks. So in a minute, we'll turn it over to questions from the audience.

But before we do, I know you were just here with the select committee, the House select committee on strategic competition, which you briefed, which I did brief, and it was, I will say, heartening bipartisan committee focused on a really important issue. So real credit to the committee and to you and the leadership of that committee.

You were here, but you weren't just talking to eggheads at Stanford, you were talking to corporate executives. So could you share with us what you think is the most important lesson or information that you're getting from the tech industry in particular, and in turn, what you think are some of the most important things that the tech industry needs to understand about this competition.

>> Ro Khanna: One, I think the tech industry understands how complex global supply chains actually are. It's easy to say, as a politician, bring it back home. It's harder when you're the actual tech executive who has to figure out how do you move the supply chains and what parts you bring back home.

So I think we have to listen to them. We don't have to always agree with them, but to listen to them about, okay, what are the challenges to bring back supply chains home? What are the challenges to move a supply chain to India? How do you actually do that?

And what is the assistance that they need from the United States government to be able to make that happen? The other thing I think technology leaders understand is how fast software is moving and how important it is for us, from a military perspective, to stay ahead on AI, on software implementation, and to work with the technology community to be able to do that.

And the third thing is, I think they've taken more time to understand China. I mean, it really is not an exaggeration to say that many of our business leaders have more relationships with people in China and the chinese government than many of the people currently, at least in Congress.

I don't know the executive branch as well in terms of that would apply, but certainly in Congress. And I do think that there is some value in that. Now, what I think the tech community and business leaders more generally need to realize is that just having economic trade, I don't think is sufficient to prevent China from invading Taiwan.

This idea that just having trade leads to peace and democracy, caricatured view of Adam Smith was more complex. But I think that's proven that's not enough, that you do need a military deterrent response. And I think the tech community needs to understand, and business leaders, that there are a lot of people who are upset with the consensus over the last 40 years of what happened with China's ascension into the World Trade Organization.

And while there may have been prosperity in places like Silicon Valley, there was a lot of economic devastation in many parts of this country that has, in part created the conditions for the polarization in America. And to understand why there is concern of so much of the offshoring to China.

>> Michael McFaul: Chris had a footnote briefly. I know we want to get to people. I thought the nuance that you talked about, trade and interdependence, decoupling versus not in your speech, is exactly right. For those of you, we're teaching it on Wednesday. Right, Laura, in our class on Wednesday.

I'll send you the syllabus on that, because you just said, rightly, that people think the mythology that trade prevents war is right, but the mythology that trade doesn't affect the probability of war or not is also wrong. The literature is way more complex than that. Thank you for that nuance.

And I think the debate moving forward, we have to talk about it, and not only vis a vis us and China, but of third countries, including Taiwan. By the way, Taiwan's done really well because of Chinese growth. TSMC, you were there. I was there. I'm not sure they want to decouple and move all their stuff to the United States of America because there's an argument that says by having an economic relationship with China, that may help keep the peace.

How do you think about those? I mean, just take semiconductors for now, because that's where the chips act and a lot of activity is. How do you balance that? What's the right place to land on that? Because you're clearly not in one camp or the other. Maybe it's an impossible question.

>> Ro Khanna: Well, I'm reminded when Mike Gallagher and I were in Taiwan, one of the dinners we had were with all these Taiwan, Taiwanese business leaders talking about their exports to China. And, Mike, I don't think you'll mind me sharing, said, so Ro was the purpose of that dinner with the Taiwanese business leaders pleading with me, don't get us into some crazy war.

And there is a sense in Taiwan that 40% of their exports are to China, and they want some of that economic relationship, not, just, by the way, the KMT, but the DPP and more broadly, the business community. Now, you know the story, I imagine some of you do, with Morris Cheng.

I didn't know until I met him. Morris Chang is an American. He's an American expat who was educated here at Stanford and at MIT, who was the number two person at Texas Instruments, passed over to be CEO because partly as his telling that he was Asian in the early 1980s and he wanted to do manufacturing and no one here wanted to do it.

So he goes to Taiwan, and they set up the entire manufacturing industry. I don't think there's a danger right now that Taiwan semiconductors is going to be displaced if we still have more manufacturing here in the United States, I think they're gonna be thriving. They're gonna be thriving on a lot of the advanced chips.

And there's enough room in the market for us to be developing more production capacity here, both for the jobs and for making sure we don't have the supply chain disruptions we had in the pandemic. And I think there are other opportunities for us to have economic relationships with Taiwan.

That the onshoring, in my view, does not put at risk the sense, well, then we aren't gonna care about Taiwan.

>> Michael McFaul: Right.

>> Amy Zegart: So I wanna make sure we get time for at least one student question. So I'm gonna ask, raise your hand, I think we have roving microphones in the room.

We have gentlemen down here in the orange shirt. Say a little bit about who you are, and then we'll wrap up after the question.

>> Speaker 4: Hi, congressman. Thanks for coming to visit us today. I'd like to ask about some of your recent trips to Iowa, South Carolina, Pennsylvania.

States with a lot of communities that you've discussed before about, how careers and opportunities have really left them behind. Could you tell us about your observations from those recent trips and about how they inform your approach to us economic competitiveness with China and other states? Thank you.

>> Ro Khanna: I appreciate that.

One of the things that I think has been so challenging about the country is the geographical lack of economic opportunity. Let me ask this room here. How many people are optimistic and believe in the american dream? Raise your hand. See, you asked that in my town hall, say, amount of hands go up.

Now you go to youngstown, Ohio, and you ask that question, or you go to Columbia, South Carolina, and you ask that question. You go to Allegheny, Pennsylvania, and you ask that question, and most hands don't go up. This is one of the big challenges in our country. You have large parts of the country that don't believe that the american dream is possible for them, not just for them, but for their kids.

And look, Barack Obama, who is the most talented politician in our generation, wanted to unify this country through the appeal of Douglass and Lincoln and Doctor King. And he achieved a lot of things, but the country was more divided after he left. My good friend Cory Booker says, let's love each other.

And I tell Cory, we can't even talk to each other. And so my view is let's do what Americans do. Let's make money together, let's have economic trade together, let's have business together. And you start to open up people's minds. You say, okay, this indian american guy from Silicon Valley, Bay Area district, he must know about technology.

He must know about money, he's here to help my kids get these opportunities. And in Allegheny, Pennsylvania, we saw this student, she was making $26,000. And then goes through this program where they're getting a $5,000 stipend. And she ends up with a $60,000 job, not as a coder for Google, at a manufacturing company in Virginia printing t shirts.

And at the end of the speech, she says, thank you for allowing me to have a safe space. And I said, what do you mean by that? And she said, well, I'm trans. And I find that this is a safe space. And that in Allegheny, Pennsylvania, is held up, she's being held up as a model for what's happening.

And in Ohio, when I was with the president in an Iranian-American with a thick accent is there in Columbus, Ohio. And calls up an eight year old boy on stage and says to that eight year old boy, one day you're gonna be running these intel factory. And fourth and fifth generation Ohio families start applauding an Iranian immigrant.

I can give speech after speech on immigration, and it's not gonna have that impact. I believe that the economic coming together of opportunity in this country, working together to rebuild this country, is not just about economics. It's the way I see us having a chance at having common national purpose at a time that we're so deeply divided.

And that's why a lot of the work that I've done has been in these communities.

>> Amy Zegart: Congressman, thank you for ending on an optimistic note. Thank you for coming to Stanford. Thank you for all you're doing for our country. Please join me in thanking Congressman.

>> Ro Khanna: Thank you.