March 19, 2025 • 47 mins
Curtailing strife and safeguarding America’s global standing requires military strength, diplomatic reach, a gravitational pull to the concepts of liberty and opportunity, and a strategy for economic growth beyond America’s shores. Andrew Grotto, a Hoover visiting fellow and veteran of two past White House national security teams, discusses the white paper he co-authored with Hoover’s H.R. McMaster on the need for a more structured and coordinated approach to US foreign policy, as well as how “economic statecraft” applies to settling the current wars in Ukraine and the Middle East, and how to win America’s “great power competition” with China (which includes a global economic component missing from the last century’s Cold War rivalry with the Soviet Union).
Recorded on March 18, 2025.
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[MUSIC]
>> Bill Whalen (00:01):
It's Tuesday, March 18, 2025.
And welcome back to Matters of Policy inPolitics, a Hoover Institution podcast
devoted to governance and balance of powerhere in America and around the world.
I'm Bill Whalen, I'm the Virginia HobbsCarpenter Distinguished Policy Fellow in
Journalism here at the Hoover Institution.
But I'm not the only Hoover Fellow whois involved in podcasting these days.
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If you don't believe me, I encourage youto go to our website, which is Hoover.org,
actually go to the following link,which is Hoover.org forward slash podcast,
and there you'll find podcasts,commentary, we cover the whole waterfront,
from foreign policy to economicsto healthcare, politics.
You name it, we got it covered,including this excellent podcast.
My guest today is Andrew Grotto.
Andrew is a Hoover InstitutionVisiting Fellow as well
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as the William J Perry InternationalSecurity Fellow at the center for
International Security andCooperation at Stanford University.
His research interests center on nationalsecurity and international economic
dimensions of America's global leadershipin information technology innovation and
its growing reliance on this innovationfor its economic and social life.
Andrew Grotto is also the co-author ofan essay he penned with Hoover's own H.R.
(01:06):
McMaster.
The title of that is Economic the Need forAn Integrative Approach.
You can find that on our website as wellHoover.org, i encourage you to go check
it, read it, and that's gonna bethe top of our conversation today.
Economic Statecraft.
So, Andrew, A.J, good to see you.
>> Andrew Grotto (01:19):
It's good to be here.
Thanks for having me, Bill.
>> Bill Whalen (01:21):
My pleasure.
So my first question was,what the heck is economic statecraft?
But if you bother to read yourexcellent essay that you and
General McMaster penned,you've defined it for us.
Let me read it to our audience.
You define economic statecraftis the following, quote,
a country's pursuit of geopoliticalobjectives using economic power.
These sources of power include US Militarystrength, its global diplomatic reach,
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the gravitational attraction of Americanideals such as liberty and opportunity,
and the economy.
So question for you, Andrew.
What possess you andGeneral McMaster to write this?
Is this something that we do pro formawhen there's a new administration in
Washington, or are we looking in 2025 ata rather unique set of circumstances given
what's happening around the globe,
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giving the political reset hereback in the United States?
>> Andrew Grotto (02:08):
Well, we've been doing economic statecraft in the United States
since the founding days of the country.
If you think about how the countryhas grown geographically,
that's been conducted primarilythrough economic statecraft,
through purchases of land Other countries,
other societies have been doing thissince, you know, the ancient Greeks,
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using economic power to pursue anynumber of geopolitical objectives.
And what we've observed inparticular over the last, say,
10 years is this acceleration andexpansion of use of this
toolkit by successive US Presidentswith issues like US China,
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great power competition,economic sanctions on Russia in
response to its full scaleinvasion of Ukraine, you know,
being great examples of just how,how increasingly central this,
this toolkit is to U.S. foreign policy.
>> Bill Whalen (03:10):
How far back are you going with American presidents, A.J?
Are you going all the way back orare you going back to Reagan, or
are you starting post Reagan,post Cold War?
>> Andrew Grotto (03:18):
Well, I think it started to pick up in the Obama administration and
it has carried through Trump won,Biden, and
certainly I think we'llsee plenty of activity.
We've already seen plenty of activityusing economic statecraft and Trump too.
But, you know, the practice,as I said, has gone back.
You can go back hundreds of years anduse this toolkit.
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After the Cold War, you know, we kindof collectively expanded our toolkit.
We expanded the use of sanctions.
If you think about the role thatsanctions played in isolating Saddam
hussein in the 1990s,the modern export control regime,
the regime that tries to controlthe spread of dual use and
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other sensitive technologies wassort of born out of the Cold War.
And so, and these tools,presidents find them attractive
because they don't involveboots in the ground and
they in some cases can,can actually achieve the,
the objectives that leaders set out forthem when they, when they use them.
>> Bill Whalen (04:33):
Okay, so you went back to Obama.
So we have Obama, Trump, Biden.
Now back to Trump.
We have kind of, this is likewatching Oprah Winfrey go on a diet.
We're yo, yo, dieting here inforeign policy, if you will.
But if we go back to your definitionhere of what's in the toolkit, and
we're talking military strength,global diplomatic reach, American ideals,
liberty, opportunity.
You look at Obama,you look at Biden, you look.
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Have any of these gentlemen managed toachieve what we would call a balanced
approach here?
Or is each president kind ofparticularly fond, favorite, you know,
favorite one particular approach?
For example, you could argue Biden,Obama diplomacy,
maybe we're seeing here with Trump,he likes to use weapons.
>> Andrew Grotto (05:10):
Yeah, well, it's a great question.
I wanna clarify sort of how HR andI use the phrase in our report.
>> Bill Whalen (05:19):
Please do.
>> Andrew Grotto (05:20):
You know, economic statecraft Economic.
The toolkit draws on economic power.
There are other tools in the foreignpolicy toolkit, diplomacy, words and
ideas, and military power that draw ondifferent sources of national power.
And, you know, the essence ofeconomic statecraft is the use of
economic power to achieveany geopolitical objective,
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whether it's economic,it could be a military objective,
it could be a diplomatic objective,and obviously different.
To come back to your question,different administrations put different
emphases on elements of national power andpursuit of US objectives.
But the one trend that I thinkwe've seen going back several
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administrations is this risein the use of economic tools.
And in particular, economic sanctions and
export controls are probably two areaswhere we've seen the most growth.
You consider, for example,the semiconductor export
controls that began in Trump onethat were extended in by Biden and
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now sort of fall in Trump two's lapseto decide what to do with them.
The idea that the export controls andsemiconductors have,
it's almost unthinkable to imagine ten,
15 years ago the US consideringcontrols that sweeping.
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But here we are.
And a big reason forwhy there's such a heightened focus on
economic statecraft is US China,great power competition,
which in many ways isa technological competition,
it's an innovation competition,which obviously involves economics.
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And naturally, economic tools likeexport controls played a big part of
the country's strategy across successiveadministrations to deal with China.
>> Bill Whalen (07:28):
Right.
And that economic competitionwas missing from Cold War one.
Right.
>> Andrew Grotto (07:32):
Yeah, there wasn't a ton of trade between sort of the Allies and
the Soviet Union, the Warsaw Pact.
So the degree of interdependencewas virtually zero.
The Europeans did some trade with, withWarsaw Pact countries, but even there,
it wasn't nearly like what yousee today with respect to U.S.
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and allied economic relations with China.
>> Bill Whalen (07:55):
Yeah, I'm not gonna do something AJ that I probably should not be
doing in the age of Donald Trump,but I wanna talk about.
Two things that are in the news today.
And I offer a word of caution here becausethings move fast as Donald Trump has come
back to office.
And so hopefully this is not old news or
stale news by the time people are watchingand listening to this podcast.
But let's first turn ourattention to Russia.
So news out today that Vladimir Putin and
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Donald Trump reportedly hada 90 minute phone call.
CNB said, CNBC reporting that Putin andTrump, quote, agreed that the movement to
peace will begin with an energy andinfrastructure ceasefire, meaning Russia,
Ukraine will not target each other'sinfrastructure energy outputs.
Fine, now here's the US Readout.
I want to read this to you.
AJ Quote, the two leaders agreed thata future with an improved bilateral
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relationship between the United States andRussia has huge upside.
This includes enormous economic deals and
geopolitical stability whenpeace has been achieved.
So I know you're not a criminologist,but those three words,
enormous economic deals, kind of screenin the middle of that statement.
So what are we getting at here?
What are enormous economic deals?
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Because this trajectory is kind of trickybecause at the heart of ending this war is
the idea there has to be someRussian culpability here for
invading this country.
You do not want to,in effect, reward Russia for
its bad behavior by giving themtrade deals or things like that.
So explain to me enormous economic deals.
>> Andrew Grotto (09:14):
I can only speculate.
I mean, enormous economic deals isa very Trumpian turn of phrase.
And I mean, we've seen this goingback to his career as a real
estate tycoon in New York, andhe fancies himself a deal maker.
And, you know, throughout, you know,the campaign, this, this past year,
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you know, even, even in, in,in, in, you know, speeches and
comments he's made since,since inauguration, he's emphasized,
you know, how, how good his administrationwould be for American business.
>> Bill Whalen (09:51):
Right.
>> Andrew Grotto (09:52):
And I think, I mean,
I don't wanna play armchairpsychologist here too much.
But like, my, my read of the situation is,you know, Trump,
Trump tends to see the worldin transactional terms.
>> Bill Whalen (10:05):
Yes.
>> Andrew Grotto (10:06):
And, you know, his, his frame of reference is business.
And I think that, you know, that it's,it's, it's easy to, you know,
in some ways to, to, to,to sort of fall into this assumption that
interdependent economicinterdependence breeds peace and
that if only there were more economicconnections between the two countries,
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you know, you'd have this Sort of win,win economic situation that would sort of
pave over all the underlying geopoliticaldisputes we have with the Russians.
And, personally think that'swishful thinking, but yeah,
I think that's the way thatthe President sees the world.
I think it raises really interesting andhard questions about China as well,
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you know, what his orientationmight be towards China.
>> Bill Whalen (10:54):
And I would get to that at the end of the podcast.
But it stands out to me, AJ,because when we talk about Russia and
economic consequences from this war,you always hear those in terms of sticks,
sanctions, more sanctions,tighten the squeeze on Russia.
This would suggest that maybecarrots could be involved.
>> Andrew Grotto (11:09):
Yeah.
And, you know, for example, you know,
the Russian energyinfrastructure is dilapidated.
It's not modern, you know,so, you know, in theory,
there's a big business opportunity forAmerican and allied, you know,
energy companies to come in andhelp help the Russians modernize.
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The Russian economy has been starvedof tech since the start of the war.
You know, the export controls have triedto clamp down on, on supplies of, of
technologies that could be used to advancethe war machine from getting to Russia.
The controls aren't perfect, butthey've certainly had an impact.
Getting those controlslifted has got to be
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an attractive carrot,from Putin's perspective.
But, you know, like, as you said, thereis this underlying geopolitical dispute,
right, over, you know,what forms of government, you know,
are, you know,best suited to liberty and other values.
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Questions about, you know, whether sortof a 19th century view of the world as,
you know, involving spheres of influenceis still the way to think about,
you know, international affairs today.
Putin certainly thinks aboutthe world in those terms, and
I'm just not sure how an economic dealpaves over those issues unless we
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decide that those are no longer issues.
And we could just decide,you know,what, we don't care.
Maybe if great powers carvethe world into spheres of influence,
we don't care if an authoritarian leaderwith, with a massive nuclear arsenal,
you know, kind of gets away with murder,literally.
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We could decide those things.
I think that would be a huge,you know, betrayal of our values and
the national interest.
But, you know, you could,
you could imagine a deal where thoseissues just kind of get paved over.
I hope it doesn't happen.
>> Bill Whalen (13:14):
Now, let's apply economic statecraft to Ukraine,
the other party in the war,and what that might look like.
Is it as grandiose as a Marshall Planto rebuild Ukraine or what?
What would you look for well, you.
>> Andrew Grotto (13:24):
Ukraine's economy has obviously been devastated by the war.
And, you know,there are huge infrastructure needs,
huge human development needs.
And, you know, I don't have the numbersoff the top of my head, but,
you know, this is,
this is, you know, hundreds of billionsof investment needed in the country.
And, you know, some of that investment,
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a lot of that investment couldcome from the US and its allies.
I also think that there'sa good chance that
we don't have the industrialcapacity to hit,
to supply all those infrastructure needs.
And so China would probablybenefit as well, I would imagine.
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China has excess industrial capacity and
has become very skilledat undercutting US and
allied companies in competition forinfrastructure projects.
So there's certainly, there's a bigeconomic dimension to Ukraine.
But again, the question becomes,is sacrificing all
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these other values worthwhatever economic gain U.S.
industry andallied industry get out of a deal.
>> Bill Whalen (14:39):
All right.
The other region in the news,AJ would be the Middle east,
where hostilities have broken out again.
Israeli forces are back in Gaza fighting.
US Forces are bombingthe Houthis in Yemen.
And we suggested that if Irangets involved in this in any way,
we will go after Iran as well.
Let's talk about the economiccomponent to settling the Middle East.
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We talk about peace, we talk aboutland and so forth, but the economy.
So there is a Trump plan to turnGaza [LAUGH] into the Riviera of
the Mediterranean.
Very quietly,there was the India, Middle East,
Europe Economic Corridor done in Septemberof 23 under the Biden administration.
This is developing a transcontinentalinfrastructure corridor as well.
But tell us a little bit about howeconomics, how economic statecraft will
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factor into any form of lastingMiddle east peace solution.
>> Andrew Grotto (15:26):
Yeah, there are a couple different dimensions to it.
One is using tools like exportcontrols over semiconductors
to try to control accessby the Chinese to advanced
AI from developingadvanced AI capabilities.
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And you've got several countriesin the Middle East that
are making big bets on becomingtechnological hubs themselves.
So the UAE is certainly.
One of these countries.
And you know, the US has an interest in,you know, the Middle east
developing digital infrastructurethat is based on American technology.
(16:12):
There are both economic reasons forthat, but also strategic reasons,
because the alternative is China, right?
And you know, from,from my perspective, you know,
the less dependent onChina the Middle east is,
the better off certainly they will be.
But also, you know, us here inthe United States, China, you know,
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the Chinese telecommunications anddigital infrastructure comes with,
with goodies inside,with surveillance goodies inside.
And so the idea that China wouldexpand its surveillance apparatus
to these critically important insome cases allies, is worrying.
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So there's an economic value proposition.
Now, we also use economic tools to coerce,right?
We have economic sanctions in placeagainst Iran export controls with varying
degrees of efficacy in terms of denyingthem the ability to access technology for
military uses and also putting pressure onthe leaders to moderate their behavior.
(17:28):
What's been missing, and this was a majordriver of the report that HR and I did,
is thinking about these tools inan integrated strategic manner, right?
So we, you know, historically we've,we've wielded this toolkit in silos.
So if you, if you go talk to someoneat the Bureau of Industry and Security,
the part of the US Governmentresponsible for, for the dual use expert
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control regime, and ask them what they do,they'll say we do export controls.
They won't say we do economic statecraft.
The same is true if you gotalk to a trade negotiator.
They don't do economic statecraft.
They do trade negotiations.
You talk to someone ineconomic development.
We don't do economic statecraft.
We do development cooperation.
Even though these tools all relyto varying degrees on American
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economic power.
And in many cases involve thatthere's either synergies between them,
or in some cases the toolscan work across purposes.
And I'll give you an example.
So, you know, as the US has ratcheted upits export controls and semiconductors
to China, the main way that China hasresponded so far is by putting export
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controls on various critical mineralsthat, that US Manufacturing relies upon.
China has a real chokehold on,on refining and mining of these, these,
these minerals.
It refines 70% of the world supply andmines 90% of it.
So China has a real true hold on thatcritical node in global supply chains.
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Well, that retaliatory actionthen fuels interest here in
the United States in industrialpolicy to develop an alternative
supply to incentivizean alternative supply for China.
And so we have this synergy betweenexport controls on the one hand,
industrial policy on the other hand.
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And we just haven't done a very goodjob historically in thinking about how
these tools can affect each other andeven come together and
have sort of an amplifying effect.
So what we call for in the reportis pretty straightforward and
new administration should have a strategy,
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try to bring these differentparts of the economic statecraft
ecosystem together to frameout an actual strategy that
use these tools inan integrated manner consistent
with American values aroundfree market principles,
liberty and other other important values.
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So that, that's,that's the gist of the report.
And so far, you know, haven't seena ton of indications that that
President Trump is, is headed down a pathof using these tools in integrated way.
But you know, it's still early days.
>> Bill Whalen (20:17):
Well, in your report you want Trump to sign an executive order.
>> Andrew Grotto (20:21):
Yeah. >> Bill Whalen
this, which would call forthe integrated strategy and
it would be done bythe National Security Advisor.
This is the job HR McMaster once had, nowheld by former Congressman Mike Waltz and
also the director of the National EconomicCouncil, who the last time I looked,
I believe is one Kevin Hassett,
formerly maybe still currentlyof the Hoover Institution.
So I'm gonna joke with you, he's signingexecutive orders left and right,
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why not just slip one in there andsee if he'll sign it?
But I'm curious why the NSA andwhy the National Economic Council?
Maybe A.J. you want to spend a coupleminutes explaining what exact
the National Economic Councildoes within the White House?
Yeah, well, so the NEC, the National Economic Council, is in
many ways the sister coordinating agenciesof the National Security Council, right?
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So the National Security Council isresponsible for coordinating a national
security policy for overseeing theimplementation of the President's agenda.
And the NEC is, is supposed to do the samefor, for economics, for economic policy.
And insofar as economic statecraftrelies on economic tools,
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any effort to formulate a strategy has gotto involve that part of the White House.
Now historically, andI worked in both the Obama and
the Trump White Houses onthe National Security Council staff and
different administrations bringa different culture to the way that
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they handle these sort of complexcross cutting policy issues.
>> Bill Whalen (21:50):
Right.
>> Andrew Grotto (21:51):
In the Obama administration,
especially by the second term,there's just sort of a lot of process.
Trump one started pretty entrepreneurial,and
sort of ended up at the endwith a fair amount of process.
The Biden administration, same deal.
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And a big question now is, you know,
the first few months of the Trumpadministration don't show a ton
of signs of broad sort of strategicthinking about how these different
tools in the economic statecrafttoolkit can come together.
But it's still early and,you know, in time,
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it's certainly possiblethat a more systematic.
I hate to use the word traditional,but for lack of a better word,
traditional approach to formulatingnational security policy, right?
Where you just sort of have thisNational Security Council process to bring
options up to the president,that takes hold.
But the time will tell, it's stillearly days and we're still in this,
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I use the phrase entrepreneurial,phaseof the administration.
>> Bill Whalen (23:04):
I think it might have been the late Bill Walsh, or
maybe it was George Seifert,who succeeded him.
But when they coached the 49ers,they had a rule which was
that basically the first five to tenplays of the game were already scripted.
We're going to run those no matter what.
And that kind of strikes me as the first100 days of theTrump administration.
They walked in with a lot ofthings they wanted to do.
Tariffs, for example, andwe'll get to that in a minute.
(23:24):
So maybe this is kind of what you doafter you take a collective breath after
the first round.
But, you know, we talked about nsc,we talked about nec, but there are other
players I'm curious about andwho would have a potential role in this.
What about the Commerce Department?
What about the USTR?
What about the Pentagon?
What about the State Department?
>> Andrew Grotto (23:43):
Yeah, all those agencies have,
have an important role to play along withthe agency formerly known as usaid, which,
you know, is a big, big the, the developof the economic statecraft toolkit.
>> Bill Whalen (23:53):
They've kind of been in the news lately.
>> Andrew Grotto (23:54):
They've been in the news lately.
Yeah, they have been.
And we can come back to that,
I think, That the core functionsof USAID will come back.
I just can't imagine.
You know, I mean, we need those tools,
in addition to all the great humanitarianwork that USCID has done over the years,
to compete with China, you know,coming back to the Middle east,
(24:16):
looking especially elsewhere inthe Global south, you know, we're.
We're not gonna, the playing field isnot level when competing with China for
infrastructure projects for data centers,
for example,which I think you'll see a big demand for,
not only here in the United States,but also in the Global South.
(24:41):
China undercuts us on price,and our best option is quality.
But price still has tobe part of the equation.
And there are some tools inthe development toolkit that can
help address some of those problems.
Coming back to the Commerce Department,yeah,
the Commerce Department is certainlya core player in economic statecraft.
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Before I worked at the White House onthe National Security Council staff,
I was then Commerce Secretary, PennyPritzker's senior advisor for tech policy.
And I spent a lot of time working onexport controls and cfius, the process
that the government uses to screen forinvestment, for national security risk.
And it always struck me that,again, we sort of approach these
(25:29):
tools in these kind of institutional siloswithout really putting enough time and
energy into thinking through, okay,how do these tools intersect?
How could we use them in a more strategic,integrated manner?
So Commerce Department's a big one.
Well, I should also mention,I mean, it's not.
(25:50):
It's not just export controlsat the Commerce Department,
the Bureau of Industry andSecurity, but, you know,
the International Trade Administrationis a part of the commerc.
The International Trade Administrationis the agency that does
countervailing duties andother trade remedies,
which is an important part ofthe economic statecraft toolkit.
The State Department doesdiplomacy on economic issues,
(26:12):
The Pentagon does economic statecraft.
They have this thing called the Officeof Strategic Capital that's
aimed at essentially incentivizingdevelopment of technologies that
the military can use that the marketmay or may not supply on its own.
That's economic statecraft.
(26:34):
There are dozens of agencies across thefederal government that are involved in
one way or another in economic statecraft.
And that's part of the challengeis how do you even begin
to identify this group of agencies?
And one of the recommendations wehave in the report is that this
(26:54):
EO that we recommend the presidentissue to direct creation of
the strategy also include a direction foragencies to essentially
raise their hand if they do economicstatecraft so that the White House,
the NSC and the President canactually get a full picture of what
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this toolkit looks like becauseit's a sprawling toolkit.
>> Bill Whalen (27:20):
I think one thing I like about this idea,
AJ Is it allows this administration,
would allow this administration to givesome thought to very complicated issues.
I'm a big fan of Trump giving morescripted speeches, for example.
Now I'm a speechwriter to pass live,so I always come down on that but
my thinking is that the more speeches hewould give scripted, the more input he has
to have from staffers, the more somespeechwriter would have to go around and
(27:41):
find out where actually the administrationcomes down on positions.
So let's go through four topics here and
let's talk about how theyapply to economic statecraft.
The big one, tariffs.
>> Andrew Grotto (27:51):
Tariffs are a big one.
They're, they're popular.
>> Bill Whalen (27:56):
Well, I'd liken it to economic gunboat diplomacy that it's kinda
the equivalent of parking a battleshipoff the coast of a nation,
that instead of the battleship,you just say, I'm dropping tariffs on you.
>> Andrew Grotto (28:08):
You know, with, with the caveat that, you know,
tariffs also impose costs on Americans.
>> Bill Whalen (28:13):
Right.
>> Andrew Grotto (28:14):
So it, and
that's the rub is these instrumentsare not costless, right?
There's, you know, anytime, you know,
the government kind of reachesinto the economy, right?
There, there is, there's some,there's some cost.
Now the benefits may be worth itin the end, but there's some cost.
And you know, with tariffs, you know,
(28:36):
we'll see what the inflationnumbers look like.
You know, there's the effectthat the tariffs could have on
the ability of the US to marshalsupport for export controls on,
you know,to address China's military modernization.
Again, you know,cross cutting issue that, you know,
(28:58):
within the sort of the narrowconfines of trade policy.
I'm not sure that there's no evidence thatI've seen that this administration has
sort of factored that piece in.
>> Bill Whalen (29:07):
Right.
>> Andrew Grotto (29:09):
Which to your point, if at some point a more sort of
regular interagency processkind of kickstarts and
has actual influence onthe President's decision making.
You know, you could, you could,you could see then, you know,
this more scripted strategicapproach come into play.
(29:30):
But time will tell.
I, you know,it's ultimately the President's decision,
how he wants to use hisnational security team.
>> Bill Whalen (29:39):
Okay, policy area number two, artificial intelligence.
>> Andrew Grotto (29:43):
So in many ways the, the US China competition can be considered a,
you know, Sort of a competition about AI.
You know, I mean, there's, there's other,there's other technologies that are, that
are really important to the competition,you know, energy, bio, life sciences.
But to me, AI is probably the bigone because it will have,
(30:07):
has the potential to both reshapethe way that wars are fought,
but also fundamentally changelabor markets productivity
within companies andhave very big economic consequences.
A lot of US economic statecraft,coming back to the export controls on
(30:30):
chips in particular, has aimed at this,this AI competition.
>> Bill Whalen (30:35):
Right.
>> Andrew Grotto (30:35):
The chips that have been targeted for control are the kinda chips
that are optimized fordeveloping and using AI algorithms.
China, you know,is almost certainly going to be a fast
follower of the United Statesin AI innovation.
(30:56):
I think we're still trying to get ourheads around what that means in practice.
What that means forthe future of export controls, right,
is will the controls have the effectthat we hope they have if
China's still able to achievea certain level of sophistication.
(31:17):
What does it mean forcompetition in other markets?
If, you know, China is able to,you know, be a fast follower and
offer AI capabilities thatmay not be as expensive,
that may not be as innovative orsort of cutting edge as American, but
might be good enough and probablya lot cheaper, what does that mean for
(31:39):
us, China, competition overinfluence in the global South?
I could talk about AI for days.
So I'll stop there andsee if you have any follow on.
>> Bill Whalen (31:53):
We will come back to it.
Now the third policy area,AJ Cybersecurity.
>> Andrew Grotto (31:58):
Yeah, so in cybersecurity.
Scenario I spent a good chunkof my career working in.
And we have used tools ofeconomic statecraft in
pursuit of cyber security objectives.
So for example, I was in the Obama NSC.
I was the senior director forcyber policy when the sanctions
(32:22):
executive order focused on malicious cyberactivity was, was signed by the President.
And you could ask, okay,you know what, what,
when I had this conversation with mystudents all the time, it's like, what,
what does it mean to say those sanctionshave or haven't worked if the overall
(32:42):
volume of attacks, say from China haven't,haven't dissipated?
And a lot depends on, you know,sort of how you, how you define success.
Economic statecraft tools have been used.
There are export controls thathave been imposed on certain
cyber capabilities to stop their spread.
(33:03):
But cyber security,
I would describe cyber policy as aninstrument of economic statecraft per se.
I would, you know,there are tools however, in the economic
statecraft toolkit that are relevantto US interests in cyberspace.
>> Bill Whalen (33:20):
And then the fourth area of semiconductors, I would note that
a couple years ago the Hoover Institutionhad a meeting in Arizona and
then Governor Doug Ducey came andtalked to us and
he must have mentioned semiconductorsabout every 30 seconds in his
speech because his state was bringing incompanies from Taiwan to build in Arizona.
>> Andrew Grotto (33:37):
Look, chips are foundational for not just AI innovation,
but you know,whether it's your automobile,
your refrigerator, you know,chips are ubiquitous.
And any country that is able togain a chokehold on elements of,
(33:57):
of, of the supply chain forchips may find itself
with a lot of leverage over,over its targets.
And China has leverage when itcomes to the critical minerals and
materials that are used in chips andchip technologies.
(34:19):
But you know, here in the United Stateswe have a chokehold over the technologies
that are most relevant to high endadvanced node semiconductor manufacturing.
For the time being, there really isn'ta competitor at the high end for
say Nvidia, for example,produces the kinds of,
(34:39):
the most popular chips thatare optimized for AI applications.
Part of the export controls have targetedthe equipment needed to produce chips.
In both suppose both the controlson the spread of chips as well as
the machinery needed to producethem are intended to deny China
access to advanced known semiconductors.
(35:02):
But over time, right, you know,I mean, China has, you know,
an innovative tech ecosystem of its own.
It is willing to spare no expense in,in terms of overcoming this,
this, this chips barrier that we've,we've put before them and so
(35:23):
there's a good chance that in time,you know, China, China will,
will come close,if not match US innovation and chips.
Is that in 10 years, 20 years,you know, who knows?
But that, that time will come.
In the meantime, China is goingto be a fast follower, you know,
(35:47):
and even if it's not able toproduce the most advanced chips,
which you know may be most efficient foruse in a data center for
AI algorithms, if China can accomplisha similar level of performance and
innovation with lower endchips that are more expensive,
(36:08):
China will spend that money.
And so I think we will be able totell in the next, I'd say year or
so whether the export controlsthat began under President Trump,
that President Biden has really amplified,extended,
have sort of caught China at thatpoint in the curve where their
(36:33):
ability to be self sufficientlyinnovative is truly hampered.
So stay tuned.
>> Bill Whalen (36:42):
Let's talk about China's economic statecraft.
The view from Beijing.
What does Beijing do differently fromthe US AG in terms of Belt and Road,
in terms of money forinfrastructure in other countries?
Is there something the US couldlearn from what China does?
Is China do things thatwe should be doing?
>> Andrew Grotto (36:58):
That's a great question, and I see this temptation in a lot of US
policy debate about China to mirrorimage what the Chinese do when
it comes to industrial policy,when it comes to other actions,
economic statecraft and beyond,there's much we can learn from China.
(37:19):
I think the Chinese in particularhave been really effective going
back decades at identifying areasof vulnerability from their
perspective in their supply chains andgoing out and trying to fix them.
Energy diplomacy in Africa and elsewhere
aimed at assuring China a supply of fuel.
(37:44):
They've done similar actions with iron andcertainly in critical minerals where
they've been able to really acquirea chokeholder for global supply chains.
>> Bill Whalen (37:54):
Now the, the way that they have gone about doing this is
primarily through a combinationof state owned enterprises and
heavily subsidized national champions.
>> Andrew Grotto (38:06):
That's not something that we ought to, to mirror.
>> Bill Whalen (38:09):
We don't have state-owned enterprises,
we don't have national champions.
>> Andrew Grotto (38:13):
And so that,
that's just that that's an area wherewe need to find other ways to compete.
>> Bill Whalen (38:19):
And I think there it's, you know, competing with,
with these companies on quality.
>> Andrew Grotto (38:23):
Right? >> Bill Whalen
in many cases we, you know, the US and
its allies can offer higherquality infrastructure.
Whether that's, you know, a data center,
whether that's a train, you name it.
>> Bill Whalen (38:34):
But we also need to get better at competing on price.
>> Andrew Grotto (38:36):
And so there, there's a lot of,
there's been a lot of innovationaround how to sort of harness and
channel private capital in support ofsome of these, these overseas projects.
>> Bill Whalen (38:48):
The Development Finance Corporation is the part of
the US Government that holds,you know, the most promise for
facilitating those, those kinds of deals.
>> Andrew Grotto (38:58):
It was actually created under, under the Trump administration.
>> Bill Whalen (39:02):
China's, it's got this excess industrial capacity.
>> Andrew Grotto (39:07):
We see that, you know, in, in, in chips where, you know, they,
they, they dump chipsin the global market.
>> Bill Whalen (39:13):
They have excess industrial capacity, which part of their,
their economic statecraft strategyis to go out and find countries
to essentially spend that excesscapacity because they spend it at home.
>> Andrew Grotto (39:28):
It has this inflationary impact on their economy,
which the Chinese government'svery keen to manage.
>> Bill Whalen (39:33):
So you see China become the largest source
of bilateral investment in the world.
>> Andrew Grotto (39:42):
Now, the way that the Chinese do call it development
cooperation is very different fromthe way that we have done it.
>> Bill Whalen (39:51):
And, you know, there may be something to learn here.
>> Andrew Grotto (39:55):
Chinese tend to provide loans, whereas the.
>> Bill Whalen (40:00):
The model in the US and
OECD countries more broadly hasreally been to focus on aid.
>> Andrew Grotto (40:06):
Maybe we ought to think about mirroring that aspect of China's
strategy and look at not just aid butloans as a vehicle for
both helping countries meettheir infrastructure and
economic development needs, butalso defend against Chinese incursions,
political or otherwise,into some of these countries.
>> Bill Whalen (40:28):
Speaker 2
Washington has been awash in Doge forthe past couple of months.
>> Andrew Grotto (40:35):
Doge has touched all corners of government, including USAID,
which you mentioned earlier.
>> Bill Whalen (40:41):
Question for you.
>> Andrew Grotto (40:42):
Can will economic statecraft survive DOGE or
is DOGE going to have an impact on howwe economically play around the world?
>> Bill Whalen (40:49):
Speaker 1
already the elimination of USCID is put,has removed, at least temporarily,
an important tool pool fromthe economic statecraft toolkit.
>> Andrew Grotto (41:04):
Speaker 2
don't you think part of thatwill come back, though?
>> Bill Whalen (41:06):
Speaker 1
>> Andrew Grotto (41:07):
Speaker 2
seems you have two pools of money here.
>> Bill Whalen (41:11):
One is the stuff that's hard to defend,
the stuff that FOX News goes crazy onwhen you're, you know, setting, you know,
$2 million worth of, you know, profileaffix to Uganda or something like that.
>> Andrew Grotto (41:21):
But then there's the investment side,
which is the more serious money, I think.
>> Bill Whalen (41:24):
So maybe, maybe cooler heads prevail and
that side of usa USAID comes back.
>> Andrew Grotto (41:29):
Speaker 1
funding streams withinU.S ID will come back.
>> Bill Whalen (41:37):
Now when that happens, who knows, maybe this summer, maybe later.
>> Andrew Grotto (41:41):
But what it's done in the meantime is reinforce for
many countries that are sort of sittingon the fence between the US And
China at least would rather not picka side that actually maybe the Americans
aren't the most reliable business partner,to say nothing of the humanitarian impact,
which is, which I think is goingto be pretty, pretty catastrophic.
>> Bill Whalen (42:02):
The other way that I think DOGE is gonna affect economic statecraft
is these kinda mass layoffsover the last couple months,
which have targeted disproportionatelyfederal employees who
are in that sort of probationaryperiod of their employment.
>> Andrew Grotto (42:20):
You know, people who were hired in the last couple years in
many cases were hired because oftheir technological expertise.
>> Bill Whalen (42:27):
And so these are the people who were brought in to help
the government think strategically about,for example,
how best to develop export controls andsemiconductors,
how to advance U.S interestsin AI innovation, right,
where if those people are gone,who's gonna pick that work up?
>> Andrew Grotto (42:52):
The, the long term effect on the government's reputation as
a good place to work, I think is,is potentially catastrophic.
>> Bill Whalen (43:03):
Students that have the technical skills to go support
development of export controls andsemiconductors, for example,
are going to have private sector options.
>> Andrew Grotto (43:13):
And many of them are certainly my students here at Stanford.
>> Bill Whalen (43:18):
Many of them are willing to forego that extra income that would
come from a private sector job in exchangefor being, being part of a public service
mission and having the opportunity towork on some really cool policy areas
that in the private sector just aren't,aren't, aren't, aren't available.
>> Andrew Grotto (43:33):
Speaker 2
statecraft and the great powerscompetition in this regard?
>> Bill Whalen (43:40):
Other nations look at what the United States is doing.
>> Andrew Grotto (43:42):
They see an administration that wants to downsize.
>> Bill Whalen (43:44):
Government was really not fond of the idea of foreign entanglements.
>> Andrew Grotto (43:48):
That was seen to present an opportunity for China.
>> Bill Whalen (43:51):
Speaker 1
>> Andrew Grotto (43:52):
And you know, I think development cooperation areas,
one where we'll certainly see impacts.
>> Bill Whalen (44:01):
You know, the Chinese have, have been running a,
a propaganda campaign to denigratethe effect of US Export controls on
China to try to persuade Americans and,and, and the Europeans and the Japanese,
all of whom have important, you know,roles to play in the supply chain and
therefore are key to have on boardthese export controls that the controls
(44:22):
aren't working, that they're futile andtherefore why, why bother?
>> Andrew Grotto (44:26):
Why, why impose costs on domestic, in your own domestic industry
if, if you aren't going to achievethe objectives that you hope to, and
you know, it doesn't help the USin making that case when you have,
you know, the President, you know,doling out tariffs, you know,
like, like he is and in generaltreating allies like punching bags.
>> Bill Whalen (44:49):
You know, it's, it's, it's hard to, you know,
you can imagine the conversation,you know, that, that, that,
you know, that an ally has internally.
>> Andrew Grotto (44:57):
If the US says hey look, we need you to roll back, for example,
your export of semiconductor manufacturingequipment to China on the one hand,
on the other hand,we're going to beat you up economically.
>> Bill Whalen (45:11):
It's just, there's just a cognitive dissonance there that I, I don't
think administration has thought throughyet and comes back to the need for having
an integrated strategy in the use of allthese different economic statecraft tools.
>> Andrew Grotto (45:23):
Speaker 2
he is signing executive orders and maybe,
who knows,AJ One day yours is going to show up.
>> Bill Whalen (45:28):
Speaker 1
>> Andrew Grotto (45:29):
I hope it does.
>> Bill Whalen (45:30):
And there are some really excellent people working in
the administration and
I hope that they are empoweredto pick this up and run with it.
>> Andrew Grotto (45:41):
Speaker 2
>> Bill Whalen (45:42):
A.J, congratulations again on the paper.
>> Andrew Grotto (45:44):
It's titled again, Economic State Craft, the Deed for
an Integrated Approach.
>> Bill Whalen (45:47):
You can get into the Hoover Institution website, hoover.org so
definitely check it out.
>> Andrew Grotto (45:51):
So enjoy the conversation.
>> Bill Whalen (45:52):
Thanks for coming on the podcast.
>> Andrew Grotto (45:53):
Speaker 1
>> Bill Whalen (45:54):
Thanks.
>> Andrew Grotto (45:55):
Speaker 2
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balance of power here in America andaround the free world.
>> Bill Whalen (46:02):
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review and subscribe to our show.
>> Andrew Grotto (46:06):
If you wouldn't mind, please spread the word.
>> Bill Whalen (46:07):
Tell your friends all the about us.
>> Andrew Grotto (46:09):
Andrew Grotto, he is on social media.
>> Bill Whalen (46:11):
Brave man that he is.
>> Andrew Grotto (46:12):
His X handle is @GrottoAndrew.
>> Bill Whalen (46:14):
That's G-R-O-T-T-O, Andrew at GrottoAndrew.
>> Andrew Grotto (46:18):
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>> Bill Whalen (46:21):
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>> Andrew Grotto (46:22):
That's H-O-O-V-E-R-I-N-S-T.
>> Bill Whalen (46:25):
And while you're there, you should sign up for
the Hoover's Daily report, which keepsyou updated what Andrew Grotto and
his Hoover colleagues are up to, that'semailed to your inbox Weekday afternoons.
>> Andrew Grotto (46:33):
Andrew Grotto, as I mentioned, co-author of the Essay Pen with
HR McMaster, Economic Statecraft,the Need for Integrated Approach.
>> Bill Whalen (46:40):
Once again, that's at the Hoover Institution's website,
Hoover.org for the Hoover Institution,this is Bill Whalen.
>> Andrew Grotto (46:45):
We'll be back soon with a new conversation.
>> Bill Whalen (46:47):
We'll be talking education reform with my colleague Michael Hartney.
>> Andrew Grotto (46:50):
What's going on in Washington with the Department
of Education?
>> Bill Whalen (46:53):
Also where education stands five years after pandemic brought
classroom instruction to halt.
>> Andrew Grotto (46:58):
So you don't want to miss that.
>> Bill Whalen (46:59):
Till then, take care, thanks again for joining us today.
>> Andrew Grotto (47:03):
Speaker 1
where we generate andpromote ideas, advancing freedom.
>> Bill Whalen (47:10):
For more information about our work, to hear more of our podcasts or
view our video content,please visit hoover.org.
[MUSIC]
>> Bill Whalen (00:01):
It's Tuesday, March 18, 2025.
And welcome back to Matters of Policy inPolitics, a Hoover Institution podcast
devoted to governance and balance of powerhere in America and around the world.
I'm Bill Whalen, I'm the Virginia HobbsCarpenter Distinguished Policy Fellow in
Journalism here at the Hoover Institution.
But I'm not the only Hoover Fellow whois involved in podcasting these days.
(00:23):
If you don't believe me, I encourage youto go to our website, which is Hoover.org,
actually go to the following link,which is Hoover.org forward slash podcast,
and there you'll find podcasts,commentary, we cover the whole waterfront,
from foreign policy to economicsto healthcare, politics.
You name it, we got it covered,including this excellent podcast.
My guest today is Andrew Grotto.
Andrew is a Hoover InstitutionVisiting Fellow as well
(00:44):
as the William J Perry InternationalSecurity Fellow at the center for
International Security andCooperation at Stanford University.
His research interests center on nationalsecurity and international economic
dimensions of America's global leadershipin information technology innovation and
its growing reliance on this innovationfor its economic and social life.
Andrew Grotto is also the co-author ofan essay he penned with Hoover's own H.R.
(01:06):
McMaster.
The title of that is Economic the Need forAn Integrative Approach.
You can find that on our website as wellHoover.org, i encourage you to go check
it, read it, and that's gonna bethe top of our conversation today.
Economic Statecraft.
So, Andrew, A.J, good to see you.
>> Andrew Grotto (01:19):
It's good to be here.
Thanks for having me, Bill.
>> Bill Whalen (01:21):
My pleasure.
So my first question was,what the heck is economic statecraft?
But if you bother to read yourexcellent essay that you and
General McMaster penned,you've defined it for us.
Let me read it to our audience.
You define economic statecraftis the following, quote,
a country's pursuit of geopoliticalobjectives using economic power.
These sources of power include US Militarystrength, its global diplomatic reach,
(01:44):
the gravitational attraction of Americanideals such as liberty and opportunity,
and the economy.
So question for you, Andrew.
What possess you andGeneral McMaster to write this?
Is this something that we do pro formawhen there's a new administration in
Washington, or are we looking in 2025 ata rather unique set of circumstances given
what's happening around the globe,
(02:04):
giving the political reset hereback in the United States?
>> Andrew Grotto (02:08):
Well, we've been doing economic statecraft in the United States
since the founding days of the country.
If you think about how the countryhas grown geographically,
that's been conducted primarilythrough economic statecraft,
through purchases of land Other countries,
other societies have been doing thissince, you know, the ancient Greeks,
(02:29):
using economic power to pursue anynumber of geopolitical objectives.
And what we've observed inparticular over the last, say,
10 years is this acceleration andexpansion of use of this
toolkit by successive US Presidentswith issues like US China,
(02:50):
great power competition,economic sanctions on Russia in
response to its full scaleinvasion of Ukraine, you know,
being great examples of just how,how increasingly central this,
this toolkit is to U.S. foreign policy.
>> Bill Whalen (03:10):
How far back are you going with American presidents, A.J?
Are you going all the way back orare you going back to Reagan, or
are you starting post Reagan,post Cold War?
>> Andrew Grotto (03:18):
Well, I think it started to pick up in the Obama administration and
it has carried through Trump won,Biden, and
certainly I think we'llsee plenty of activity.
We've already seen plenty of activityusing economic statecraft and Trump too.
But, you know, the practice,as I said, has gone back.
You can go back hundreds of years anduse this toolkit.
(03:43):
After the Cold War, you know, we kindof collectively expanded our toolkit.
We expanded the use of sanctions.
If you think about the role thatsanctions played in isolating Saddam
hussein in the 1990s,the modern export control regime,
the regime that tries to controlthe spread of dual use and
(04:07):
other sensitive technologies wassort of born out of the Cold War.
And so, and these tools,presidents find them attractive
because they don't involveboots in the ground and
they in some cases can,can actually achieve the,
the objectives that leaders set out forthem when they, when they use them.
>> Bill Whalen (04:33):
Okay, so you went back to Obama.
So we have Obama, Trump, Biden.
Now back to Trump.
We have kind of, this is likewatching Oprah Winfrey go on a diet.
We're yo, yo, dieting here inforeign policy, if you will.
But if we go back to your definitionhere of what's in the toolkit, and
we're talking military strength,global diplomatic reach, American ideals,
liberty, opportunity.
You look at Obama,you look at Biden, you look.
(04:55):
Have any of these gentlemen managed toachieve what we would call a balanced
approach here?
Or is each president kind ofparticularly fond, favorite, you know,
favorite one particular approach?
For example, you could argue Biden,Obama diplomacy,
maybe we're seeing here with Trump,he likes to use weapons.
>> Andrew Grotto (05:10):
Yeah, well, it's a great question.
I wanna clarify sort of how HR andI use the phrase in our report.
>> Bill Whalen (05:19):
Please do.
>> Andrew Grotto (05:20):
You know, economic statecraft Economic.
The toolkit draws on economic power.
There are other tools in the foreignpolicy toolkit, diplomacy, words and
ideas, and military power that draw ondifferent sources of national power.
And, you know, the essence ofeconomic statecraft is the use of
economic power to achieveany geopolitical objective,
(05:44):
whether it's economic,it could be a military objective,
it could be a diplomatic objective,and obviously different.
To come back to your question,different administrations put different
emphases on elements of national power andpursuit of US objectives.
But the one trend that I thinkwe've seen going back several
(06:08):
administrations is this risein the use of economic tools.
And in particular, economic sanctions and
export controls are probably two areaswhere we've seen the most growth.
You consider, for example,the semiconductor export
controls that began in Trump onethat were extended in by Biden and
(06:30):
now sort of fall in Trump two's lapseto decide what to do with them.
The idea that the export controls andsemiconductors have,
it's almost unthinkable to imagine ten,
15 years ago the US consideringcontrols that sweeping.
(06:55):
But here we are.
And a big reason forwhy there's such a heightened focus on
economic statecraft is US China,great power competition,
which in many ways isa technological competition,
it's an innovation competition,which obviously involves economics.
(07:16):
And naturally, economic tools likeexport controls played a big part of
the country's strategy across successiveadministrations to deal with China.
>> Bill Whalen (07:28):
Right.
And that economic competitionwas missing from Cold War one.
Right.
>> Andrew Grotto (07:32):
Yeah, there wasn't a ton of trade between sort of the Allies and
the Soviet Union, the Warsaw Pact.
So the degree of interdependencewas virtually zero.
The Europeans did some trade with, withWarsaw Pact countries, but even there,
it wasn't nearly like what yousee today with respect to U.S.
(07:52):
and allied economic relations with China.
>> Bill Whalen (07:55):
Yeah, I'm not gonna do something AJ that I probably should not be
doing in the age of Donald Trump,but I wanna talk about.
Two things that are in the news today.
And I offer a word of caution here becausethings move fast as Donald Trump has come
back to office.
And so hopefully this is not old news or
stale news by the time people are watchingand listening to this podcast.
But let's first turn ourattention to Russia.
So news out today that Vladimir Putin and
(08:15):
Donald Trump reportedly hada 90 minute phone call.
CNB said, CNBC reporting that Putin andTrump, quote, agreed that the movement to
peace will begin with an energy andinfrastructure ceasefire, meaning Russia,
Ukraine will not target each other'sinfrastructure energy outputs.
Fine, now here's the US Readout.
I want to read this to you.
AJ Quote, the two leaders agreed thata future with an improved bilateral
(08:36):
relationship between the United States andRussia has huge upside.
This includes enormous economic deals and
geopolitical stability whenpeace has been achieved.
So I know you're not a criminologist,but those three words,
enormous economic deals, kind of screenin the middle of that statement.
So what are we getting at here?
What are enormous economic deals?
(08:57):
Because this trajectory is kind of trickybecause at the heart of ending this war is
the idea there has to be someRussian culpability here for
invading this country.
You do not want to,in effect, reward Russia for
its bad behavior by giving themtrade deals or things like that.
So explain to me enormous economic deals.
>> Andrew Grotto (09:14):
I can only speculate.
I mean, enormous economic deals isa very Trumpian turn of phrase.
And I mean, we've seen this goingback to his career as a real
estate tycoon in New York, andhe fancies himself a deal maker.
And, you know, throughout, you know,the campaign, this, this past year,
(09:38):
you know, even, even in, in,in, in, you know, speeches and
comments he's made since,since inauguration, he's emphasized,
you know, how, how good his administrationwould be for American business.
>> Bill Whalen (09:51):
Right.
>> Andrew Grotto (09:52):
And I think, I mean,
I don't wanna play armchairpsychologist here too much.
But like, my, my read of the situation is,you know, Trump,
Trump tends to see the worldin transactional terms.
>> Bill Whalen (10:05):
Yes.
>> Andrew Grotto (10:06):
And, you know, his, his frame of reference is business.
And I think that, you know, that it's,it's, it's easy to, you know,
in some ways to, to, to,to sort of fall into this assumption that
interdependent economicinterdependence breeds peace and
that if only there were more economicconnections between the two countries,
(10:26):
you know, you'd have this Sort of win,win economic situation that would sort of
pave over all the underlying geopoliticaldisputes we have with the Russians.
And, personally think that'swishful thinking, but yeah,
I think that's the way thatthe President sees the world.
I think it raises really interesting andhard questions about China as well,
(10:51):
you know, what his orientationmight be towards China.
>> Bill Whalen (10:54):
And I would get to that at the end of the podcast.
But it stands out to me, AJ,because when we talk about Russia and
economic consequences from this war,you always hear those in terms of sticks,
sanctions, more sanctions,tighten the squeeze on Russia.
This would suggest that maybecarrots could be involved.
>> Andrew Grotto (11:09):
Yeah.
And, you know, for example, you know,
the Russian energyinfrastructure is dilapidated.
It's not modern, you know,so, you know, in theory,
there's a big business opportunity forAmerican and allied, you know,
energy companies to come in andhelp help the Russians modernize.
(11:31):
The Russian economy has been starvedof tech since the start of the war.
You know, the export controls have triedto clamp down on, on supplies of, of
technologies that could be used to advancethe war machine from getting to Russia.
The controls aren't perfect, butthey've certainly had an impact.
Getting those controlslifted has got to be
(11:54):
an attractive carrot,from Putin's perspective.
But, you know, like, as you said, thereis this underlying geopolitical dispute,
right, over, you know,what forms of government, you know,
are, you know,best suited to liberty and other values.
(12:16):
Questions about, you know, whether sortof a 19th century view of the world as,
you know, involving spheres of influenceis still the way to think about,
you know, international affairs today.
Putin certainly thinks aboutthe world in those terms, and
I'm just not sure how an economic dealpaves over those issues unless we
(12:38):
decide that those are no longer issues.
And we could just decide,you know,what, we don't care.
Maybe if great powers carvethe world into spheres of influence,
we don't care if an authoritarian leaderwith, with a massive nuclear arsenal,
you know, kind of gets away with murder,literally.
(12:58):
We could decide those things.
I think that would be a huge,you know, betrayal of our values and
the national interest.
But, you know, you could,
you could imagine a deal where thoseissues just kind of get paved over.
I hope it doesn't happen.
>> Bill Whalen (13:14):
Now, let's apply economic statecraft to Ukraine,
the other party in the war,and what that might look like.
Is it as grandiose as a Marshall Planto rebuild Ukraine or what?
What would you look for well, you.
>> Andrew Grotto (13:24):
Ukraine's economy has obviously been devastated by the war.
And, you know,there are huge infrastructure needs,
huge human development needs.
And, you know, I don't have the numbersoff the top of my head, but,
you know, this is,
this is, you know, hundreds of billionsof investment needed in the country.
And, you know, some of that investment,
(13:45):
a lot of that investment couldcome from the US and its allies.
I also think that there'sa good chance that
we don't have the industrialcapacity to hit,
to supply all those infrastructure needs.
And so China would probablybenefit as well, I would imagine.
(14:08):
China has excess industrial capacity and
has become very skilledat undercutting US and
allied companies in competition forinfrastructure projects.
So there's certainly, there's a bigeconomic dimension to Ukraine.
But again, the question becomes,is sacrificing all
(14:30):
these other values worthwhatever economic gain U.S.
industry andallied industry get out of a deal.
>> Bill Whalen (14:39):
All right.
The other region in the news,AJ would be the Middle east,
where hostilities have broken out again.
Israeli forces are back in Gaza fighting.
US Forces are bombingthe Houthis in Yemen.
And we suggested that if Irangets involved in this in any way,
we will go after Iran as well.
Let's talk about the economiccomponent to settling the Middle East.
(15:00):
We talk about peace, we talk aboutland and so forth, but the economy.
So there is a Trump plan to turnGaza [LAUGH] into the Riviera of
the Mediterranean.
Very quietly,there was the India, Middle East,
Europe Economic Corridor done in Septemberof 23 under the Biden administration.
This is developing a transcontinentalinfrastructure corridor as well.
But tell us a little bit about howeconomics, how economic statecraft will
(15:23):
factor into any form of lastingMiddle east peace solution.
>> Andrew Grotto (15:26):
Yeah, there are a couple different dimensions to it.
One is using tools like exportcontrols over semiconductors
to try to control accessby the Chinese to advanced
AI from developingadvanced AI capabilities.
(15:47):
And you've got several countriesin the Middle East that
are making big bets on becomingtechnological hubs themselves.
So the UAE is certainly.
One of these countries.
And you know, the US has an interest in,you know, the Middle east
developing digital infrastructurethat is based on American technology.
(16:12):
There are both economic reasons forthat, but also strategic reasons,
because the alternative is China, right?
And you know, from,from my perspective, you know,
the less dependent onChina the Middle east is,
the better off certainly they will be.
But also, you know, us here inthe United States, China, you know,
(16:36):
the Chinese telecommunications anddigital infrastructure comes with,
with goodies inside,with surveillance goodies inside.
And so the idea that China wouldexpand its surveillance apparatus
to these critically important insome cases allies, is worrying.
(17:00):
So there's an economic value proposition.
Now, we also use economic tools to coerce,right?
We have economic sanctions in placeagainst Iran export controls with varying
degrees of efficacy in terms of denyingthem the ability to access technology for
military uses and also putting pressure onthe leaders to moderate their behavior.
(17:28):
What's been missing, and this was a majordriver of the report that HR and I did,
is thinking about these tools inan integrated strategic manner, right?
So we, you know, historically we've,we've wielded this toolkit in silos.
So if you, if you go talk to someoneat the Bureau of Industry and Security,
the part of the US Governmentresponsible for, for the dual use expert
(17:51):
control regime, and ask them what they do,they'll say we do export controls.
They won't say we do economic statecraft.
The same is true if you gotalk to a trade negotiator.
They don't do economic statecraft.
They do trade negotiations.
You talk to someone ineconomic development.
We don't do economic statecraft.
We do development cooperation.
Even though these tools all relyto varying degrees on American
(18:12):
economic power.
And in many cases involve thatthere's either synergies between them,
or in some cases the toolscan work across purposes.
And I'll give you an example.
So, you know, as the US has ratcheted upits export controls and semiconductors
to China, the main way that China hasresponded so far is by putting export
(18:34):
controls on various critical mineralsthat, that US Manufacturing relies upon.
China has a real chokehold on,on refining and mining of these, these,
these minerals.
It refines 70% of the world supply andmines 90% of it.
So China has a real true hold on thatcritical node in global supply chains.
(18:55):
Well, that retaliatory actionthen fuels interest here in
the United States in industrialpolicy to develop an alternative
supply to incentivizean alternative supply for China.
And so we have this synergy betweenexport controls on the one hand,
industrial policy on the other hand.
(19:15):
And we just haven't done a very goodjob historically in thinking about how
these tools can affect each other andeven come together and
have sort of an amplifying effect.
So what we call for in the reportis pretty straightforward and
new administration should have a strategy,
(19:36):
try to bring these differentparts of the economic statecraft
ecosystem together to frameout an actual strategy that
use these tools inan integrated manner consistent
with American values aroundfree market principles,
liberty and other other important values.
(19:59):
So that, that's,that's the gist of the report.
And so far, you know, haven't seena ton of indications that that
President Trump is, is headed down a pathof using these tools in integrated way.
But you know, it's still early days.
>> Bill Whalen (20:17):
Well, in your report you want Trump to sign an executive order.
>> Andrew Grotto (20:21):
Yeah. >> Bill Whalen
this, which would call forthe integrated strategy and
it would be done bythe National Security Advisor.
This is the job HR McMaster once had, nowheld by former Congressman Mike Waltz and
also the director of the National EconomicCouncil, who the last time I looked,
I believe is one Kevin Hassett,
formerly maybe still currentlyof the Hoover Institution.
So I'm gonna joke with you, he's signingexecutive orders left and right,
(20:43):
why not just slip one in there andsee if he'll sign it?
But I'm curious why the NSA andwhy the National Economic Council?
Maybe A.J. you want to spend a coupleminutes explaining what exact
the National Economic Councildoes within the White House?
Yeah, well, so the NEC, the National Economic Council, is in
many ways the sister coordinating agenciesof the National Security Council, right?
(21:04):
So the National Security Council isresponsible for coordinating a national
security policy for overseeing theimplementation of the President's agenda.
And the NEC is, is supposed to do the samefor, for economics, for economic policy.
And insofar as economic statecraftrelies on economic tools,
(21:24):
any effort to formulate a strategy has gotto involve that part of the White House.
Now historically, andI worked in both the Obama and
the Trump White Houses onthe National Security Council staff and
different administrations bringa different culture to the way that
(21:45):
they handle these sort of complexcross cutting policy issues.
>> Bill Whalen (21:50):
Right.
>> Andrew Grotto (21:51):
In the Obama administration,
especially by the second term,there's just sort of a lot of process.
Trump one started pretty entrepreneurial,and
sort of ended up at the endwith a fair amount of process.
The Biden administration, same deal.
(22:13):
And a big question now is, you know,
the first few months of the Trumpadministration don't show a ton
of signs of broad sort of strategicthinking about how these different
tools in the economic statecrafttoolkit can come together.
But it's still early and,you know, in time,
(22:34):
it's certainly possiblethat a more systematic.
I hate to use the word traditional,but for lack of a better word,
traditional approach to formulatingnational security policy, right?
Where you just sort of have thisNational Security Council process to bring
options up to the president,that takes hold.
But the time will tell, it's stillearly days and we're still in this,
(22:59):
I use the phrase entrepreneurial,phaseof the administration.
>> Bill Whalen (23:04):
I think it might have been the late Bill Walsh, or
maybe it was George Seifert,who succeeded him.
But when they coached the 49ers,they had a rule which was
that basically the first five to tenplays of the game were already scripted.
We're going to run those no matter what.
And that kind of strikes me as the first100 days of theTrump administration.
They walked in with a lot ofthings they wanted to do.
Tariffs, for example, andwe'll get to that in a minute.
(23:24):
So maybe this is kind of what you doafter you take a collective breath after
the first round.
But, you know, we talked about nsc,we talked about nec, but there are other
players I'm curious about andwho would have a potential role in this.
What about the Commerce Department?
What about the USTR?
What about the Pentagon?
What about the State Department?
>> Andrew Grotto (23:43):
Yeah, all those agencies have,
have an important role to play along withthe agency formerly known as usaid, which,
you know, is a big, big the, the developof the economic statecraft toolkit.
>> Bill Whalen (23:53):
They've kind of been in the news lately.
>> Andrew Grotto (23:54):
They've been in the news lately.
Yeah, they have been.
And we can come back to that,
I think, That the core functionsof USAID will come back.
I just can't imagine.
You know, I mean, we need those tools,
in addition to all the great humanitarianwork that USCID has done over the years,
to compete with China, you know,coming back to the Middle east,
(24:16):
looking especially elsewhere inthe Global south, you know, we're.
We're not gonna, the playing field isnot level when competing with China for
infrastructure projects for data centers,
for example,which I think you'll see a big demand for,
not only here in the United States,but also in the Global South.
(24:41):
China undercuts us on price,and our best option is quality.
But price still has tobe part of the equation.
And there are some tools inthe development toolkit that can
help address some of those problems.
Coming back to the Commerce Department,yeah,
the Commerce Department is certainlya core player in economic statecraft.
(25:05):
Before I worked at the White House onthe National Security Council staff,
I was then Commerce Secretary, PennyPritzker's senior advisor for tech policy.
And I spent a lot of time working onexport controls and cfius, the process
that the government uses to screen forinvestment, for national security risk.
And it always struck me that,again, we sort of approach these
(25:29):
tools in these kind of institutional siloswithout really putting enough time and
energy into thinking through, okay,how do these tools intersect?
How could we use them in a more strategic,integrated manner?
So Commerce Department's a big one.
Well, I should also mention,I mean, it's not.
(25:50):
It's not just export controlsat the Commerce Department,
the Bureau of Industry andSecurity, but, you know,
the International Trade Administrationis a part of the commerc.
The International Trade Administrationis the agency that does
countervailing duties andother trade remedies,
which is an important part ofthe economic statecraft toolkit.
The State Department doesdiplomacy on economic issues,
(26:12):
The Pentagon does economic statecraft.
They have this thing called the Officeof Strategic Capital that's
aimed at essentially incentivizingdevelopment of technologies that
the military can use that the marketmay or may not supply on its own.
That's economic statecraft.
(26:34):
There are dozens of agencies across thefederal government that are involved in
one way or another in economic statecraft.
And that's part of the challengeis how do you even begin
to identify this group of agencies?
And one of the recommendations wehave in the report is that this
(26:54):
EO that we recommend the presidentissue to direct creation of
the strategy also include a direction foragencies to essentially
raise their hand if they do economicstatecraft so that the White House,
the NSC and the President canactually get a full picture of what
(27:15):
this toolkit looks like becauseit's a sprawling toolkit.
>> Bill Whalen (27:20):
I think one thing I like about this idea,
AJ Is it allows this administration,
would allow this administration to givesome thought to very complicated issues.
I'm a big fan of Trump giving morescripted speeches, for example.
Now I'm a speechwriter to pass live,so I always come down on that but
my thinking is that the more speeches hewould give scripted, the more input he has
to have from staffers, the more somespeechwriter would have to go around and
(27:41):
find out where actually the administrationcomes down on positions.
So let's go through four topics here and
let's talk about how theyapply to economic statecraft.
The big one, tariffs.
>> Andrew Grotto (27:51):
Tariffs are a big one.
They're, they're popular.
>> Bill Whalen (27:56):
Well, I'd liken it to economic gunboat diplomacy that it's kinda
the equivalent of parking a battleshipoff the coast of a nation,
that instead of the battleship,you just say, I'm dropping tariffs on you.
>> Andrew Grotto (28:08):
You know, with, with the caveat that, you know,
tariffs also impose costs on Americans.
>> Bill Whalen (28:13):
Right.
>> Andrew Grotto (28:14):
So it, and
that's the rub is these instrumentsare not costless, right?
There's, you know, anytime, you know,
the government kind of reachesinto the economy, right?
There, there is, there's some,there's some cost.
Now the benefits may be worth itin the end, but there's some cost.
And you know, with tariffs, you know,
(28:36):
we'll see what the inflationnumbers look like.
You know, there's the effectthat the tariffs could have on
the ability of the US to marshalsupport for export controls on,
you know,to address China's military modernization.
Again, you know,cross cutting issue that, you know,
(28:58):
within the sort of the narrowconfines of trade policy.
I'm not sure that there's no evidence thatI've seen that this administration has
sort of factored that piece in.
>> Bill Whalen (29:07):
Right.
>> Andrew Grotto (29:09):
Which to your point, if at some point a more sort of
regular interagency processkind of kickstarts and
has actual influence onthe President's decision making.
You know, you could, you could,you could see then, you know,
this more scripted strategicapproach come into play.
(29:30):
But time will tell.
I, you know,it's ultimately the President's decision,
how he wants to use hisnational security team.
>> Bill Whalen (29:39):
Okay, policy area number two, artificial intelligence.
>> Andrew Grotto (29:43):
So in many ways the, the US China competition can be considered a,
you know, Sort of a competition about AI.
You know, I mean, there's, there's other,there's other technologies that are, that
are really important to the competition,you know, energy, bio, life sciences.
But to me, AI is probably the bigone because it will have,
(30:07):
has the potential to both reshapethe way that wars are fought,
but also fundamentally changelabor markets productivity
within companies andhave very big economic consequences.
A lot of US economic statecraft,coming back to the export controls on
(30:30):
chips in particular, has aimed at this,this AI competition.
>> Bill Whalen (30:35):
Right.
>> Andrew Grotto (30:35):
The chips that have been targeted for control are the kinda chips
that are optimized fordeveloping and using AI algorithms.
China, you know,is almost certainly going to be a fast
follower of the United Statesin AI innovation.
(30:56):
I think we're still trying to get ourheads around what that means in practice.
What that means forthe future of export controls, right,
is will the controls have the effectthat we hope they have if
China's still able to achievea certain level of sophistication.
(31:17):
What does it mean forcompetition in other markets?
If, you know, China is able to,you know, be a fast follower and
offer AI capabilities thatmay not be as expensive,
that may not be as innovative orsort of cutting edge as American, but
might be good enough and probablya lot cheaper, what does that mean for
(31:39):
us, China, competition overinfluence in the global South?
I could talk about AI for days.
So I'll stop there andsee if you have any follow on.
>> Bill Whalen (31:53):
We will come back to it.
Now the third policy area,AJ Cybersecurity.
>> Andrew Grotto (31:58):
Yeah, so in cybersecurity.
Scenario I spent a good chunkof my career working in.
And we have used tools ofeconomic statecraft in
pursuit of cyber security objectives.
So for example, I was in the Obama NSC.
I was the senior director forcyber policy when the sanctions
(32:22):
executive order focused on malicious cyberactivity was, was signed by the President.
And you could ask, okay,you know what, what,
when I had this conversation with mystudents all the time, it's like, what,
what does it mean to say those sanctionshave or haven't worked if the overall
(32:42):
volume of attacks, say from China haven't,haven't dissipated?
And a lot depends on, you know,sort of how you, how you define success.
Economic statecraft tools have been used.
There are export controls thathave been imposed on certain
cyber capabilities to stop their spread.
(33:03):
But cyber security,
I would describe cyber policy as aninstrument of economic statecraft per se.
I would, you know,there are tools however, in the economic
statecraft toolkit that are relevantto US interests in cyberspace.
>> Bill Whalen (33:20):
And then the fourth area of semiconductors, I would note that
a couple years ago the Hoover Institutionhad a meeting in Arizona and
then Governor Doug Ducey came andtalked to us and
he must have mentioned semiconductorsabout every 30 seconds in his
speech because his state was bringing incompanies from Taiwan to build in Arizona.
>> Andrew Grotto (33:37):
Look, chips are foundational for not just AI innovation,
but you know,whether it's your automobile,
your refrigerator, you know,chips are ubiquitous.
And any country that is able togain a chokehold on elements of,
(33:57):
of, of the supply chain forchips may find itself
with a lot of leverage over,over its targets.
And China has leverage when itcomes to the critical minerals and
materials that are used in chips andchip technologies.
(34:19):
But you know, here in the United Stateswe have a chokehold over the technologies
that are most relevant to high endadvanced node semiconductor manufacturing.
For the time being, there really isn'ta competitor at the high end for
say Nvidia, for example,produces the kinds of,
(34:39):
the most popular chips thatare optimized for AI applications.
Part of the export controls have targetedthe equipment needed to produce chips.
In both suppose both the controlson the spread of chips as well as
the machinery needed to producethem are intended to deny China
access to advanced known semiconductors.
(35:02):
But over time, right, you know,I mean, China has, you know,
an innovative tech ecosystem of its own.
It is willing to spare no expense in,in terms of overcoming this,
this, this chips barrier that we've,we've put before them and so
(35:23):
there's a good chance that in time,you know, China, China will,
will come close,if not match US innovation and chips.
Is that in 10 years, 20 years,you know, who knows?
But that, that time will come.
In the meantime, China is goingto be a fast follower, you know,
(35:47):
and even if it's not able toproduce the most advanced chips,
which you know may be most efficient foruse in a data center for
AI algorithms, if China can accomplisha similar level of performance and
innovation with lower endchips that are more expensive,
(36:08):
China will spend that money.
And so I think we will be able totell in the next, I'd say year or
so whether the export controlsthat began under President Trump,
that President Biden has really amplified,extended,
have sort of caught China at thatpoint in the curve where their
(36:33):
ability to be self sufficientlyinnovative is truly hampered.
So stay tuned.
>> Bill Whalen (36:42):
Let's talk about China's economic statecraft.
The view from Beijing.
What does Beijing do differently fromthe US AG in terms of Belt and Road,
in terms of money forinfrastructure in other countries?
Is there something the US couldlearn from what China does?
Is China do things thatwe should be doing?
>> Andrew Grotto (36:58):
That's a great question, and I see this temptation in a lot of US
policy debate about China to mirrorimage what the Chinese do when
it comes to industrial policy,when it comes to other actions,
economic statecraft and beyond,there's much we can learn from China.
(37:19):
I think the Chinese in particularhave been really effective going
back decades at identifying areasof vulnerability from their
perspective in their supply chains andgoing out and trying to fix them.
Energy diplomacy in Africa and elsewhere
aimed at assuring China a supply of fuel.
(37:44):
They've done similar actions with iron andcertainly in critical minerals where
they've been able to really acquirea chokeholder for global supply chains.
>> Bill Whalen (37:54):
Now the, the way that they have gone about doing this is
primarily through a combinationof state owned enterprises and
heavily subsidized national champions.
>> Andrew Grotto (38:06):
That's not something that we ought to, to mirror.
>> Bill Whalen (38:09):
We don't have state-owned enterprises,
we don't have national champions.
>> Andrew Grotto (38:13):
And so that,
that's just that that's an area wherewe need to find other ways to compete.
>> Bill Whalen (38:19):
And I think there it's, you know, competing with,
with these companies on quality.
>> Andrew Grotto (38:23):
Right? >> Bill Whalen
in many cases we, you know, the US and
its allies can offer higherquality infrastructure.
Whether that's, you know, a data center,
whether that's a train, you name it.
>> Bill Whalen (38:34):
But we also need to get better at competing on price.
>> Andrew Grotto (38:36):
And so there, there's a lot of,
there's been a lot of innovationaround how to sort of harness and
channel private capital in support ofsome of these, these overseas projects.
>> Bill Whalen (38:48):
The Development Finance Corporation is the part of
the US Government that holds,you know, the most promise for
facilitating those, those kinds of deals.
>> Andrew Grotto (38:58):
It was actually created under, under the Trump administration.
>> Bill Whalen (39:02):
China's, it's got this excess industrial capacity.
>> Andrew Grotto (39:07):
We see that, you know, in, in, in chips where, you know, they,
they, they dump chipsin the global market.
>> Bill Whalen (39:13):
They have excess industrial capacity, which part of their,
their economic statecraft strategyis to go out and find countries
to essentially spend that excesscapacity because they spend it at home.
>> Andrew Grotto (39:28):
It has this inflationary impact on their economy,
which the Chinese government'svery keen to manage.
>> Bill Whalen (39:33):
So you see China become the largest source
of bilateral investment in the world.
>> Andrew Grotto (39:42):
Now, the way that the Chinese do call it development
cooperation is very different fromthe way that we have done it.
>> Bill Whalen (39:51):
And, you know, there may be something to learn here.
>> Andrew Grotto (39:55):
Chinese tend to provide loans, whereas the.
>> Bill Whalen (40:00):
The model in the US and
OECD countries more broadly hasreally been to focus on aid.
>> Andrew Grotto (40:06):
Maybe we ought to think about mirroring that aspect of China's
strategy and look at not just aid butloans as a vehicle for
both helping countries meettheir infrastructure and
economic development needs, butalso defend against Chinese incursions,
political or otherwise,into some of these countries.
>> Bill Whalen (40:28):
Speaker 2
Washington has been awash in Doge forthe past couple of months.
>> Andrew Grotto (40:35):
Doge has touched all corners of government, including USAID,
which you mentioned earlier.
>> Bill Whalen (40:41):
Question for you.
>> Andrew Grotto (40:42):
Can will economic statecraft survive DOGE or
is DOGE going to have an impact on howwe economically play around the world?
>> Bill Whalen (40:49):
Speaker 1
already the elimination of USCID is put,has removed, at least temporarily,
an important tool pool fromthe economic statecraft toolkit.
>> Andrew Grotto (41:04):
Speaker 2
don't you think part of thatwill come back, though?
>> Bill Whalen (41:06):
Speaker 1
>> Andrew Grotto (41:07):
Speaker 2
seems you have two pools of money here.
>> Bill Whalen (41:11):
One is the stuff that's hard to defend,
the stuff that FOX News goes crazy onwhen you're, you know, setting, you know,
$2 million worth of, you know, profileaffix to Uganda or something like that.
>> Andrew Grotto (41:21):
But then there's the investment side,
which is the more serious money, I think.
>> Bill Whalen (41:24):
So maybe, maybe cooler heads prevail and
that side of usa USAID comes back.
>> Andrew Grotto (41:29):
Speaker 1
funding streams withinU.S ID will come back.
>> Bill Whalen (41:37):
Now when that happens, who knows, maybe this summer, maybe later.
>> Andrew Grotto (41:41):
But what it's done in the meantime is reinforce for
many countries that are sort of sittingon the fence between the US And
China at least would rather not picka side that actually maybe the Americans
aren't the most reliable business partner,to say nothing of the humanitarian impact,
which is, which I think is goingto be pretty, pretty catastrophic.
>> Bill Whalen (42:02):
The other way that I think DOGE is gonna affect economic statecraft
is these kinda mass layoffsover the last couple months,
which have targeted disproportionatelyfederal employees who
are in that sort of probationaryperiod of their employment.
>> Andrew Grotto (42:20):
You know, people who were hired in the last couple years in
many cases were hired because oftheir technological expertise.
>> Bill Whalen (42:27):
And so these are the people who were brought in to help
the government think strategically about,for example,
how best to develop export controls andsemiconductors,
how to advance U.S interestsin AI innovation, right,
where if those people are gone,who's gonna pick that work up?
>> Andrew Grotto (42:52):
The, the long term effect on the government's reputation as
a good place to work, I think is,is potentially catastrophic.
>> Bill Whalen (43:03):
Students that have the technical skills to go support
development of export controls andsemiconductors, for example,
are going to have private sector options.
>> Andrew Grotto (43:13):
And many of them are certainly my students here at Stanford.
>> Bill Whalen (43:18):
Many of them are willing to forego that extra income that would
come from a private sector job in exchangefor being, being part of a public service
mission and having the opportunity towork on some really cool policy areas
that in the private sector just aren't,aren't, aren't, aren't available.
>> Andrew Grotto (43:33):
Speaker 2
statecraft and the great powerscompetition in this regard?
>> Bill Whalen (43:40):
Other nations look at what the United States is doing.
>> Andrew Grotto (43:42):
They see an administration that wants to downsize.
>> Bill Whalen (43:44):
Government was really not fond of the idea of foreign entanglements.
>> Andrew Grotto (43:48):
That was seen to present an opportunity for China.
>> Bill Whalen (43:51):
Speaker 1
>> Andrew Grotto (43:52):
And you know, I think development cooperation areas,
one where we'll certainly see impacts.
>> Bill Whalen (44:01):
You know, the Chinese have, have been running a,
a propaganda campaign to denigratethe effect of US Export controls on
China to try to persuade Americans and,and, and the Europeans and the Japanese,
all of whom have important, you know,roles to play in the supply chain and
therefore are key to have on boardthese export controls that the controls
(44:22):
aren't working, that they're futile andtherefore why, why bother?
>> Andrew Grotto (44:26):
Why, why impose costs on domestic, in your own domestic industry
if, if you aren't going to achievethe objectives that you hope to, and
you know, it doesn't help the USin making that case when you have,
you know, the President, you know,doling out tariffs, you know,
like, like he is and in generaltreating allies like punching bags.
>> Bill Whalen (44:49):
You know, it's, it's, it's hard to, you know,
you can imagine the conversation,you know, that, that, that,
you know, that an ally has internally.
>> Andrew Grotto (44:57):
If the US says hey look, we need you to roll back, for example,
your export of semiconductor manufacturingequipment to China on the one hand,
on the other hand,we're going to beat you up economically.
>> Bill Whalen (45:11):
It's just, there's just a cognitive dissonance there that I, I don't
think administration has thought throughyet and comes back to the need for having
an integrated strategy in the use of allthese different economic statecraft tools.
>> Andrew Grotto (45:23):
Speaker 2
he is signing executive orders and maybe,
who knows,AJ One day yours is going to show up.
>> Bill Whalen (45:28):
Speaker 1
>> Andrew Grotto (45:29):
I hope it does.
>> Bill Whalen (45:30):
And there are some really excellent people working in
the administration and
I hope that they are empoweredto pick this up and run with it.
>> Andrew Grotto (45:41):
Speaker 2
>> Bill Whalen (45:42):
A.J, congratulations again on the paper.
>> Andrew Grotto (45:44):
It's titled again, Economic State Craft, the Deed for
an Integrated Approach.
>> Bill Whalen (45:47):
You can get into the Hoover Institution website, hoover.org so
definitely check it out.
>> Andrew Grotto (45:51):
So enjoy the conversation.
>> Bill Whalen (45:52):
Thanks for coming on the podcast.
>> Andrew Grotto (45:53):
Speaker 1
>> Bill Whalen (45:54):
Thanks.
>> Andrew Grotto (45:55):
Speaker 2
politics at Hoover Institution Podcastdevoted governance and
balance of power here in America andaround the free world.
>> Bill Whalen (46:02):
If you've been enjoying this podcast, please don't forget to rate,
review and subscribe to our show.
>> Andrew Grotto (46:06):
If you wouldn't mind, please spread the word.
>> Bill Whalen (46:07):
Tell your friends all the about us.
>> Andrew Grotto (46:09):
Andrew Grotto, he is on social media.
>> Bill Whalen (46:11):
Brave man that he is.
>> Andrew Grotto (46:12):
His X handle is @GrottoAndrew.
>> Bill Whalen (46:14):
That's G-R-O-T-T-O, Andrew at GrottoAndrew.
>> Andrew Grotto (46:18):
The Hoover Institution has Facebook, Instagram and X feeds.
>> Bill Whalen (46:21):
Our X handle is at @Hooverinst.
>> Andrew Grotto (46:22):
That's H-O-O-V-E-R-I-N-S-T.
>> Bill Whalen (46:25):
And while you're there, you should sign up for
the Hoover's Daily report, which keepsyou updated what Andrew Grotto and
his Hoover colleagues are up to, that'semailed to your inbox Weekday afternoons.
>> Andrew Grotto (46:33):
Andrew Grotto, as I mentioned, co-author of the Essay Pen with
HR McMaster, Economic Statecraft,the Need for Integrated Approach.
>> Bill Whalen (46:40):
Once again, that's at the Hoover Institution's website,
Hoover.org for the Hoover Institution,this is Bill Whalen.
>> Andrew Grotto (46:45):
We'll be back soon with a new conversation.
>> Bill Whalen (46:47):
We'll be talking education reform with my colleague Michael Hartney.
>> Andrew Grotto (46:50):
What's going on in Washington with the Department
of Education?
>> Bill Whalen (46:53):
Also where education stands five years after pandemic brought
classroom instruction to halt.
>> Andrew Grotto (46:58):
So you don't want to miss that.
>> Bill Whalen (46:59):
Till then, take care, thanks again for joining us today.
>> Andrew Grotto (47:03):
Speaker 1
where we generate andpromote ideas, advancing freedom.
>> Bill Whalen (47:10):
For more information about our work, to hear more of our podcasts or
view our video content,please visit hoover.org.
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