Can America Handle the Rise of Asia?

February 28, 2008

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MR. MAHUBABANI: (In progress) -- Western minds -- (inaudible). Because I think one of the key goals of this book, which is actually going to be very difficult, is to persuade people in the West who always think that the West is always part of the solution to the world's problems, increasingly the 88 percent of the world's population who live outside the West see the West as the largest source of many of the world's problems. Now, this is a complete reversal of attitudes. Because when you come to discussions at the Council on Foreign Relations, you sit here, you look at the world, and you say, my, God, guys, I don't know what the hell's happening. If we could only fix the world, set things right. How are we going to fix it? All the attitude is the problem's out there, the solution is over here. Really, the most revolutionary premise that I have in the book is that the West must begin to understand that it itself is generating many of the world's problems.

Now, your question was about Asia. It's important to understand that there is something remarkable happening in Asia. It's an amazing thing. And in some ways, I'm glad you referred to Japan. It began with Japan, but Japan's success then inspired the success of the Four Tigers --Korea, Taiwan, Hong Kong, Singapore. And from there, it went to Southeast Asia, and clearly, several Southeast Asian states began to succeed, too.

And then from there, frankly -- and this is what I call the master modernity in the book -- we leapt into China. Because Deng Xiaoping left China, came to Southeast Asia, and said, how come the rest of Southeast Asia is so far ahead of China? China is as good a civilization as anybody else. We should be ahead, not behind. SoChina decided to switch policies. And for the last 30 years,China has had the fastest-growing economy in the world.

Now, from China, when Chinatook off, basicallyIndia then said, why not us? Why can't we do whatChina is doing? And that's what motivatedIndia to open up, to compete. And when I talk of the march to modernity, it's important for me to emphasize that what you have to carry, the visual picture you have to carry in your minds, is our minds, that used to have a certain perspective, opening up and beginning to think hey, we can do it, too, we can succeed, too.

And clearly, the explosion of cultural confidence that we see, beginning with Japan, Four Tigers, Southeast Asia, China India, that is spreading throughout Asia. And the really good news from a Western point of view is that this march to modernity is about to enter the Islamic world. Because the younger Muslims who, in the past, in a sense, had a binary choice, right -- either you follow the road of the West or you follow the road of Osama bin Laden -- now are saying hey, why can't we be likeChina and India? Why can't we modernize? Why can't we have successful economies?

So everybody would like to separate Asiaout into distinct packets. I am telling you that the new story in Asia is how it's all coming together. And you see this in terms of people flows, right. The faster growing people flows are within Asia. The reason by Boeing has great difficulty meeting its production demands is because of demands of aircraft from Asians who want to travel more throughout Asia and China and Japan, China and India, Southeast Asia and China and so on, so forth. These are the new flows inJapan.

So a new Asia is being created even as we speak. And the new Asia basically is going to be a positive addition to the world, because it is creating hundreds of millions of responsible stakeholders who want to have a stake in a stable global order and who don't want to disrupt the global order, who want to work with the West. And the problem that Asians feel is that the West is not ready to accept Asians as an equal partner. And that's why I define it asAsia and the West.

MS. FROST: Well, let's pick up on that point then about world order. You make the statement in your book that Asians are proving to be more capable of delivering a stable world order. And indeed, the record inSoutheast Asia, particularly, is remarkable. And no ASEAN member has gone to war with another since the founding of ASEAN in 1967 and peaceful engagement norms, such as the peaceful settlement of disputes, have made great strides in Asia. But then you make the statement that the Balkans and theMiddle East are really no more difficult to handle than Asia.

So you have to ask, well, is what the Asians are doing transferable to the world order? You state that the Asian mentality is hierarchical, at one point in the book. So if that is so, are you anticipating sort of a hierarchical world order of some kind? You seem, in other places, to be calling, as many of us do, for the reform of international institutions, such as the World Bank and the IMF. And we, I think both of us, agree that the structure and the process does not reflect this new vitality and growth that you mention.

So what would Asians do? What would they do if we succeeded in reforming these institutions? What would they do if we asked them to transfer to the rest of the world some of the lessons they've learned in Asia? Could they get over what I've always seen as a kind of watch-and-wait mentality, a passive quality, reluctance to speak up? What would be different, do you think, if your vision came true?

MR. MAHBUBANI: Well, I'm very glad you brought up the geopolitical dimension. Because one of the more surprising things I say in the book is, you know, you look at regional cooperation, for example, right. And you talk of regional cooperation, and everybody sees the European Union as the gold standard of regional cooperation, and everyone else is second class or third class, and so on, so forth. And it's true in terms of internal economic integration, the European Union is number one and way ahead of anybody else. ASEAN, the Association of Southeast Asian Nations, has a long way to go before it can catch up with the European Union in terms of internal economic integration.

But if you look at the geopolitical performance, the difference between ASEAN and the EU, the way I'd say it, is that EU is an economic superpower, ASEAN is an economic mini power. But in diplomatic terms, the EU is a diplomatic mini power, and ASEAN is a superpower. And how do I explain that? If you look all around the EU, right, everywhere, look at all these borders. Look atNorth Africa, look at the Middle East, look at the Caucuses, look at the Balkans, look at Kosovo today. Essentially, the European Union fails diplomatically when it leaves Europe.

By contrast, the Association of Southeast Asian Nations, which is so much weaker, so much smaller, has been able to create various informal processes that have created an unnatural development in Asia. The unnatural development in Asia is that you're seeing in Asia the emergence of all the great powers, all the new great powers are emerging in Asia. Traditionally, when great powers emerged, you should always see some kind of rising tension and conflict. Instead, in East Asia, you're seeing reducing tension and conflict, not rising. This goes against the grain. And this is a result of what I call Asian geopolitical competence.

And for me, having leftNew York and gone back to Asia four years ago, I find a strange paradox whereby you have the best geopolitical discussions in the world in New York, and I'm sure in this house, you have the best geopolitical discussions. But if you want to see geopolitical performance, you have to go to Asia to see it. And how does one explain this paradox? I mean, the Asians are nowhere near as sophisticated, nowhere near as articulate in expressing their point of view in the way that you would get in discussions in a room like this. And yet, when it comes to performance, they can carry out brilliant geopolitical moves which are amazing.

And I'd mention just two brilliant geopolitical moves, okay. Take China for example. Now, China has obviously decided, is aware that at some point in time it's inevitable the United States might try to contain the rise ofChina. You don't have to be a great genius to foresee that might be happening. But what has Chinadone? Long before the United Stateshas worked out this policy, it's launched a preemptive strike against an American containment policy, and its preemptive strike is to share its prosperity with all its neighbors.

And this explains why the fastest-growing trade flows in the world are not inEurope, not across the Atlantic, not across the Pacific but withinEast Asia. And this affects a conscious decision by China to say hey, I want all my neighbors to be tied to the Chinese economy, we have a stake in China's prosperity.

And the most amazing thing Chinadid was to propose a free trade agreement. This is a state that's still run by the Communist Party of China, proposes a free trade agreement to 500 million people in Southeast Asia. Not only did they propose the free trade agreement, they concluded the free trade agreement in record time. And before the free trade agreement was completed, there was a unilateral, early harvest gift by China to the Southeast Asian states.

Now, compare that with the EU and Africa. Clearly, if anything goes wrong in Africa, European Union is going to suffer. Why couldn't the European Union do something like what China did with Southeast Asia? The European Union is much more advanced, much more sophisticated, much more ahead, but it's China that lances this preemptive strike. So it is things like this that are happening in a real time frame today that are completely transforming the fabric of Asia, and that's not captured in the discussions over here.

MS. FROST: I have to express a little skepticism about these FTAs, the free trade agreements. They are often full of exceptions. And even when there's nominal free trade, local officials in China often block imports. Just ask the Thai farmers. Nevertheless, it is a very forward-looking strategy, and I do agree with you that ASEAN, in particular, has responded very, very well to all of this. What do you think then -- go back to the sort of a broader theme. Do you think Chinese interests are fundamentally incompatible with American interests? Do you think that, for example, that there's only Western values versus Asian interests, and that we're actually promoting our own interests? Or do you think that what we're seeing in Asia is an opportunity for both Asians and Westerners to work out complementary or even converging interests?

I ask this because it's often assumed that Western domination of these international institutions is a facade for Western interests. And this has the ring of truth to it. But then when you think what are Western interests, aren't they free and open markets, aren't they some sort of participatory government or at least an end of really repressive violations of human rights, is there really something so different here?

MR. MAHBUBANI: This is where maybe I should share some good news. (Laughter.) The good news is, you know, I have a line in the book that says that as Asian rises, Asiadoesn't want to dominate the West, Asiawants to replicate the West. And basically, the Asians like the 1945 rules-based order that was an American gift to the world. And indeed, believe me, the Asians are today the biggest beneficiaries of this 1945 rules-based order. And they want this rules-based order to continue. And they don't want to tear it down.

And you know, if you want to try and understand how China and India ought to emerge, all you have to do is study 20th century history where Japan and Germany emerged as great powers twice in the 20th century, once before 1945 when the only way you emerged as a great power was to go out and conquer and colonize, which is what the Germans did, which is what the Japanese did. After 1945, Japanand Germany reemerge as great powers again, but peacefully, played by the rules. Their economy grew, their influence grew, and the world order continued. And if you want a simple model of how Chinaand India ought to emerge, they say we want to emerge like Japanand Germany did after World War II. We'll play by the rules, too, as long as the rules are maintained on a fair and equitable basis.

And here, one of the real dangers that the world faces -- you're right, by the way. The West has done an excellent job of being custodians of many of these international rules. But the reason why the West did a very good job in being the custodians of all these international rules because most Western populations believed for a long time that on a level playing field, the Western economies would compete and win with no problem. All of you open up your doors, open up your economies, let's compete, don't worry, let the best man win.

Today, we have this strange situation where the Western rhetoric continues to be open up, compete, open up, compete. You look at the populations and you look at the internal discourse both in Europeand America and it has this tremendous fear of international competition. And this is why someone like Lou Dobbs has an enormous amount of resonance in America. He gets a lot of play, because people are afraid of losing jobs to the Chinese and Indians. And this is going to create, in a sense, a major challenge for the world.

This is why the moment we are in today in world history is one of the most drastic moments ever. It's the decisions we make in the next five to 10 years on how you respond to the rise of China will be able to determine the course of 21st century history. If the West suddenly gets frightened of this competition and begins to retreat from international trade liberalization, then I think we are in trouble. Then we're going to retreat from the model of Japan and Germany emerging and playing on a level playing field. The West can continue to say, hey, no, we will maintain these rules, even if we do not appear to be the primary beneficiaries.

Believe me, I cannot see a scenario where America and Europe cannot compete with the rest of the world. It's impossible. You have the world's best universities. You have the world's best companies. You have tremendous resources in Americaand Europe. I don't see how you can possibly not be able to compete withChina and India, but amazingly enough, the populations are losing confidence in the West. And I hope that, frankly, a way can be found to restore this confidence, because you need this confidence in building a new world order which accommodates the rights of Asia.

MS. FROST: Before opening it up, let me just make a couple of final comments. First of all, I really applaud the inclusion of India in your book. I included it in my book. There's a tendency not to takeIndia seriously. And it's obviously starting from a lower base and has massive infrastructure and other social problems. But I do wonder if it's always wise to think in terms of nation states. We all see trans-border, global opportunities and threats. But even more than that, in my book, I looked atAsia from space, as it were; I mean, literally from a NASA photograph. And what you see is I believe the resurgence of an older maritimeAsia, the Asia of coastal communities and ports. And that's where the wealth is. That's where the investment is. That's where the flows of people are.

And you see that particularly -- or also in southern and coastal India. India as a whole doesn't add up necessarily to very much. But the dynamism, I think, in these coastal regions is quite striking.

One final comment I'd make about what you see as the erosion of free trade ideology in the West. I think maybe you have a tendency to hold the rest of the world constant and then just to look at statements of Americans or Europeans. It isn't just that these new economies have entered into the world economy. They've discovered the use of anti-dumping. Their economies are often riddled with subsidies. There's a lot that doesn't correspond to the pure market's ideology of the (get ?). And I think that that accounts, in part, for this rising sense of threat.

And the other is that absence, in this country anyway, of effective adjustment mechanisms, whether it's wage insurance, portability of pensions, portability of health care, effective adjustment assistance retraining, you name it, we really don't have it. And I think that if I were a steelworker and lost my job, the economists could tell me that oh, our unemployment rate is so low. But for me, the unemployment rate would be 100 percent. And I think it's the tendency to think of trade in a box when in fact the world is becoming more integrated. That is the problem here.

At this time, let me open up the conversation to members here in the audience. I'd like to ask all of you to wait for the microphone. And we have a question here in the front.

If you could start coming.

Please stand and give your name and affiliation, and limit yourself to one question only, if you please. That's a Council rule.

Q I'm Mark Engleson (sp), I'm the chairman of -- (inaudible) -- Partners.

Your Excellency, we're going to have, as you well know, an election in the United States in November. Could that election change the primary premise of your book if it turns out a certain way? What will be the messaging toAsia from the United States?

MR. MAHBUBANI: Thank you. By the way, I'm no longer an excellency. (Laughter.) I'm a has-been.

MS. FROST: You're merely excellent.

MR. MAHBUBANI: I have to emphasize that because, I mean, I'm enjoying the pleasures of giving up diplomacy and practicing how to be undiplomatic. (Laughter.) So please don't hold theSingapore government to any of my views that I'm saying.

Now, clearly, I mean, actually, I wrote a column for Newsweek International, which amazingly got an enormous amount of attention, which said that the election of one candidate would remove half of the entire Americanism in the world. And this candidate, of course, is Barack Obama. It's pretty obvious, you know. I mean, clearly, I mean, Africais going to jump up for joy and celebrate. You have no idea the impact it's going to have, you know. And I think it's also going to have a significant impact even on the Islamic world, too, with Obama's election.

But I'll tell you, one of the most amazing things that happened to me was I was about to appear on a Bloomberg TV program. You know, here I'm a pundit on Asia. In Asia, I'm a pundit on America. (Laughter.) The night before I was supposed to have -- be on a Bloomberg TV program, I had dinner with one of the richest men in India. And I can't give his name. But anyway, so I asked him, I said, listen, I'm going to Bloomberg tomorrow. I'm going to talk about the U.S.elections. Which candidate should I support? And to my absolute surprise, this guy, you know, he's an amazing capitalist, said, Kishore, root for Obama, root for Obama! And that, for me, was an eye opener, you know? You know, I expected the support from Obama to come from different sectors. To come from a billionaire in Indiais really quite amazing.

But I would think that that would get rid of half of the anti-Americanism while the other half remains. And many of the problems that America had with the world predated the Bush administration. And as you know, Osama bin Laden didn't plan his attacks on 9/11 just after Bush was elected. The first attack on the WorldTrade Center was in 1992. There's still some powerful structural problems in America's relations with the world that have to be resolved, okay.

There is still, by the way, in the world, enormous reservoirs of good will towardsAmerica, believe me. People are aware of the good that Americahas done for the world. It is specific American policies that's caused a lot of problems. And frankly, if you want me to name you -- name one policy, if you want a magic bullet to solve a lot of America's problems in the world, solve theMiddle East problem, believe me. (Laughter.) I'm not kidding.

MS. FROST: Yeah, I know, I know. We try.

MR. MAHBUBANI: It is the one magic thing you can do to get rid of doing that. Because the rest of the world sees -- and this is important for you to know this -- they perceive you to be the big obstacle in solving this problem. They may be right, they may be wrong. But this is how the world perceives you. And if you are unaware of that then clearly -- (audio break) -- aware of what the real world thinks of America.

The amazing thing is that we have a solution in the Middle East. Bill Clinton Taba accords combined with the Arab League peace proposal has given us the best possible moment to bring about peace in the Middle East.

Plus, you have a situation today where ironically the biggest result of the American invasion of Iraq is that Iran's stature has risen. The Arabs are frightened of Iran now. They don't mind having Israel as another geopolitical player. This creates a wonderful opportunity to work out a peace deal. Now this is where geopolitical competence is so important. You could have the best geopolitical discussions in the world. It's what you deliver in deeds that matters the most.

And many people see that today we have a unique opportunity to work out a deal in theMiddle East. And they are amazed that this opportunity has not been taken. Because if you take it, you solve the Middle East, you slice off another half of the remaining anti-Americanism, believe me.

MS. FROST: I have to agree with that.

Yes, this lady here.

Q Thank you. My name is Joanna Weschler with Security Council Report.

In your book, you say you have some harsh words for the council, especially it's lack of accountability. I wanted to ask you a twofold question. I hope the chairperson will allow me. One, in the five years, I guess, since you left the council, has there been any change, either direction, in that department? And the second question to you, the optimist, do you think that there will be a significant change in the Security Council, including its composition, anytime soon?

MS. FROST: At first I thought you were talking about the Council here. (Laughter.)

Q No, I'm sorry. Security Council Report is my organization, so I have a one-track mind.

MS. FROST: I understand.

MR. MAHBUBANI: Well, should I be politically incorrect and say maybe the Council on Foreign Relations also needs reform? (Laughter.)

For the Security Council, I mean, this is the tragedy that we have today in the world, you know. Because if you want to fix the world, it's actually not very difficult in terms of principles, okay. The founding fathers of the U.N. did something brilliant. They said that the League of Nations died, because the great powers were not given a special stake in the League of Nations. So in the United Nations, they gave the great powers a special place by giving them the veto power in the U.N. Security Council. And I think in principle that's a good idea.

But I think what the founding fathers had in mind was that you should have the great powers of the day (for ?) the great powers of tomorrow are not the great powers of yesterday. And today what you have in the U.N. Security Council is the great powers of yesterday who, unfortunately, refuse to make way and adjust and give way.

So if you really want to see Security Council reform, looking at the candidates, which countries should come in, which countries shouldn't come in, look at the principles upon which you want to do your reform. And the principles are very clear.

First of all, you want to ensure that the great powers of tomorrow that are there and the great powers of yesterday.

Two, you want to create an institution that is much more accountable than it has been in the past. And having served two years in the U.N. Security Council, if you are looking for one of the most closed, opaque organizations in the world, that's the U.N. Security Council. Believe me. The world doesn't really know what goes on because, you know, I always said to compare the Security Council to an onion. There are many layers, and the closer you got to the center, the more you began to tear, you know. (Laughter.)

Then you begin to discover how decisions are really made in the council. And it's all, unfortunately, through a series of tradeoffs within one side against the other side, you know. You know, you scratch my back, I scratch your back. You claw my back, I claw your back. And so basically, the peace side make all kinds of trades among themselves. Sometimes it results in good decisions. Often it results in bad decisions.

So, I mean, Joanna, my answer to you is the Security Council needs to be reformed. It can be reformed but not along the present route that is being taken.

Yeah.

MS. FROST: Here's a question from Susan Roosevelt Weld at HarvardLaw School.

It seems that theUnited States can handle Asia's peaceful rise if funds and political emphasis are redirected from the Department of Defense to the Department of State and a revived USIA. I think there's a missing period there. If this redirection takes place, what will the Asian nations do to reassure Americans, who are still somewhat anxious about the 9/11 attacks, that such a redeployment of resources will not be seen as weakness and an invitation to abandon the strategy of peace?

MR. MAHBUBANI: Well, I don't advocate -- well, even though I have left diplomacy and I'm not a peacenik, I actually believe that military expenditures will carry on. And frankly, in my second book, Beyond the Age of Innocence: Rebuilding Trust Between America and the World, I mean, I actually did say on record that the American military is a gift to the world. Because it is the American military that keeps international sea lanes, international air ways open for trade and people and goods to flow around the world. So clearly, you do need to have some military capability. But the question is whether you need so much.

And the one area, frankly, I would advocate something be done is in the area of nuclear weapons. I just don't understand what security you're getting with 26,000 nuclear weapons. I mean, it's absurd. And the danger here is that one of the most effective treaties since World War II is a nonproliferation treaty. I mean, yeah, few nuclear powers have emerged, okay --Israel, Pakistan, India -- but by and large, we have kept the nuclear genie in the box -- by and large. Of course, you know, we didn't get the 20 to 25 nuclear weapon states that we anticipated would come about.

The danger we face today, and this is a very real danger, is that the NPT is legally alive but spiritually dead or dying. And one reason why it is dying is because there's a perception among many countries in the world this is always an unfair treaty. It was nuclear apartheid, okay. Five states could have legal nuclear weapons the rest couldn't have. But never mind.

But as part of the deal, the nuclear weapon states gave an explicit commitment to reduce their nuclear arsenals and to, you know, not modernize them. That's what the opposite is happening. Why? I mean, these nuclear weapons are not going to buy you any additional security. But the death of the NPT will create greater insecurity for you.

How is it you can do something so illogical, how can the world's best-educated country, the best-informed country, end up doing something which is completely illogical and unnecessary for the world?

MS. FROST: I agree with you, and I think this is one of the strongest parts of your book. I would only add that I think the United Statestends to focus overwhelmingly on the supply of bad things and not the demand for bad things, and that would include narcotics as well as nuclear weapons. What is it that gives rise to the demand for nuclear weapons, and what can we do to create alternate incentives?

I have been neglecting this part of the room -- way in the back. Try to keep questions and answers short.

Q My name is Jim Dingaman. I'm from the INM World Report.

Earlier in your talk, you talked about the question of trade, the rise of China and India as an issue that the United States will have to come to grips with in the next 10 years. And also you talked about Lou Dobbs. I was wondering, if you look at the Ohio primary, one of the key issues there is the question of NAFTA. And Lou Dobbs may be the tip of the spear, but there's been several decades of deindustrialization in the United States. There has been a decline in incomes in working-class and middle-class incomes throughout the country. How does that factor in your perception of perhaps resentment towards China and India in a populist sense in America?

MR. MAHBUBANI: Yeah, actually, I'm very glad you raise the question, because I forgot to respond to a critical point you made, Ellen.

And you used the word adjustment by the way. And I think, clearly -- I don't think you can reverse the costs of globalization by the way. No matter what we do, globalization is going to grow by leaps and bounds. In fact, you're going to see, by the way -- another prediction I make in the book was that you'll see the Asianization of globalization and so on and so forth.

But the result of all this is that all of us have to adjust to the new competition that is emerging. That is,Singapore has to adjust to it, you know. Singapore is a high wage country, in fact, one of the highest in Asia. But when the Chinese begin to produce textiles, when the Chinese begin to produce cheap toys, don't both to compete with them. Don't even try. There's no way you can compete with them. We have to move up the value-added ladder.

And of course, it was one of the great European economists Schumpeter who said that with capitalism you have created destruction. And when Ford invents the auto car to stop producing horse and buggies, okay. Economics change, you have to adapt.

But the challenge we have, and this is a major challenge, is that people at the bottom of the society are going to have a very hard time adjusting to globalization. And every society will have to develop some kind of social safety net to take care of people at the very bottom. And Singapore decided to do that, by the way. I mean, we don't announce it, but you can see, effectively, the government giving all kinds of ways and means, you know. They don't call it welfare, they call it workfare. But they make sure that the people at the bottom get something to do.

If you lose your jobs to Chinaand India -- and you will lose jobs toChina and India. It's inevitable. It's just the result of the whole global economy changing. You've got to create new opportunities, and you have to create a new ability for the workers to respond. And I think this is what all of us need to think about, how each one of us look for the right safety net for our societies.

MS. FROST: A question from this side of the room. Yes, back there.

Q Rick Smith from Newsweek, your occasional publisher. (Laughter.)

Kishore, I know that you lost patience with American moralizing a long time ago. And you've said that afterGuantanamo and Abu Ghraib that the U.S. has nothing to offer in terms of international human rights standards. What role, if any, in your view, does a discussion of human rights, what place does it have in international diplomatic discussions?

MS. FROST: That's a very key point. And are there any other questions that are related to that?

Okay, Kishore, go ahead.

(Off mike commentary.)

Okay -- (inaudible) -- democracy.

MR. MAHBUBANI: I know.

(Off mike commentary.)

Sure.

(Off mike commentary.)

MS. FROST: That is one of the questions from the national membership. From Kara Tanballa (sp) in Lawrence, Kansas -- in view of the ASEAN's failure to affect the policies of Burma, Burma's ruling junta, what can ASEAN do to contain Chinaand its transition to a global political power? Is the United Statesexpected to do all the heavy lifting?

There were three or four questions wrapped up together there, but let's take -- (inaudible) -- and your comment about human rights and democracy.

MR. MAHBUBANI: Well, I certainly hope, by the way, that we live in a world where there's greater respect for human rights, you know. I mean, I always keep saying, you know, Asians don't like to have their nails pulled out. Asians don't like to disappear at night. Asians don't like arbitrary detentions. Believe me, as Asian societies progress, they also want to see greater respect for human rights.

And on democracy, I can also assure you that most Asians realize that the end destination is clear. That all societies eventually will have to evolve, in one way or another, towards democratic society. The destination is not in doubt. The only question is the route and how you get there.

Now, if you want to know what the big change needs to be done, Rick. I mean, many people in the West are not aware of how they come across to the rest of the world when they speak about democracy and human rights. There's a tremendous amount of arrogance and smugness that comes through in discourse of democracy and human rights, which completely destroys the message that you're trying to convey.

But if the West can learn to both talk and listen and you go from a one-way street of ideas to a two-way street of ideas, then I think you can have a better discourse on issues like human rights, on issues like democracy and so on, so forth. And believe me, if the State Department still wants to produce annual human rights reports on every country in the world exceptAmerica, we should begin the human rights report, give it credibility and say we, in the United States, we practice torture. We have done so since this date. This is our view now on human rights. Fair enough. You put that on record as your position, and then people will say okay, now you can judge us and tell us what you think we are doing wrong.

In terms of the history of human rights, the way I see it, there were two great leaps forward. One was the abolishment of slavery -- and today, I think it's inconceivable to any of us that we would ever return to conditions of slavery; the other great leap forward was the move towards abolishing of torture. And if you had asked me 10 years ago when I arrived in New York, can you conceive, Kishore, of the possibilities that some day the great defender of democracy and human rights, the United States, would one day practice torture, I would have said to you no way, not possible, never the United States.

But for the -- Amnesty International to declare that Guantanamo is the Gulag of our times, it had a metaphysical impact on the world that I think not many were just not aware of. But a discourse on human rights and democracy should continue but in a different way. And I hope that it will continue.

Now, let me turn toMyanmar or Burma. And I would admit clearly that Myanmar or Burma is one of ASEAN's big failures, really. We tried and we failed. Are you happy now to hand over the problem back to you, by the way? (Laughter.)

(Off mike commentary.)

And you know, I had breakfast about 10, 12 days ago with the grandson of Utan (sp), you know -- (inaudible) -- who has written a book on Burma. And he said, the great tragedy of this Western policy of imposing sanctions on Burmais that you completely have given Burmainto the arms of the Chinese, totally. And in 20 years where you could have had some kind of Western influence inBurma is long gone. The sanctions just do not work.

And indeed, all that sanctions do is that they make you feel good, because you feel like you've done the right thing, but they do no good. If you want to do good, then you have to engage the societies and deal with an adversary.

Now let me -- one important point, let me turn to another country which is, across the country, very much in everybody's minds today -- Iran, right. Iran is one of the biggest preoccupations of policymakers here. And one of the, I guess, more provocative things I said in my book is that, you know, diplomacy was invested 2,500 years ago not to enable you to talk to your friends. You don't need diplomatic immunity to talk to your friends. You need diplomatic immunity to talk to your adversaries, your enemies. And the Greek and Persians did that 2,000 years ago.

Today, the world's most advanced state cannot do what our ancestors could do 2,500 years ago just to establish diplomatic relations with an adversary. IfIran is an adversary, fine, establish diplomatic relations. That's what diplomacy was invented for. But you cannot put across this simple, commonsensical advice in Washington, D.C., because that option is closed. Now that's an example of what I call, if you look in terms of geopolitical competence, this is how you judge it. Believe me, if you want to transform Iran, if you want to do something about it, do what they did 2,500 years ago, establish diplomatic relations.

MS. FROST: Yes, I agree. I'm going to bunch some questions now.

Here in the front -- two or three questions. Would you like to stand? And here's the microphone coming. Yeah.

Q Kishore, hi, I'm Kent Sorenson.

All -- wise -- wise as always. Your survey of Asia talked about challenges, mostly economic, from China, India, Japan. You've even worked in Myanmar and Iran. What about Pakistanwhich I think in the next couple of years may be higher on the U.S. agenda than any other part ofAsia?

MS. FROST: Okay, just hold that for a moment. And we had a question right here. Did you -- no? Okay. There was someone back there.

Q James Tunkey, I-OnAsia. Nice to see you again, Kishore.

My question builds on Mr. Sorenson's. You've laid a challenge for the West to solve the Middle East. With the withdrawal, hypothetically, of U.S. troops from South Korea or our funding of the Pakistani government, how would ASEAN solve either challenge?

MS. FROST: Why don't you enter those two.

MR. MAHBUBANI: Okay. Let me -- Pakistan, by the way, is a very good question to ask. And I was inPakistan for the first time last September -- September 2007. And I went there because I'm ethnically Sindi. And I went to discover the home that my mother grew up in Hyderabad, and I had never seen it, so I saw it for the first time in my life. And I expected that as a Hindu Sindi I would receive some kind of, you know -- you know how bad the partition was, right, withIndia and Pakistan. Millions died. I thought I would at least receive some degree of animosity towards Hindus -- zero. This is stunning to me, first off.

And secondly, if I look -- and I talked to the young people in Pakistan. It was very clear what their vision of the future was. Their vision of the future was to do what Chinaand India had done, open up and modernize. And I'd give one simple, classic example of how there's hoping for Pakistan.

There's a campus inMalaysia which I knew. Forty years ago, I went there. None of the Malay Muslim girls 40 years ago wore any hijab in the Malaysian campus. Today, you go to the Malaysian campus, 99.9 percent of the women wear hijab in Malaysia. Now, you go to a similar campus in Lahore, Pakistan -- (inaudible) -- guess what? Less than 50 percent of the women on the campus were wearing the hijab. It's wonderful. You walk in there, it's just like an American campus.

You know, the Pakistan story, I believe -- this is why I think that the most of domestic message in my book is about ensuring that the march to modernity goes into the Islamic world, too. And I think it can be done. I think that Muslims want that to happen. And a country like Pakistan would be a classic example for that happen. They've got to go through some painful political changes. But you look at the recent elections, the extremist Islamist parties lost votes significantly. When you give the people of Pakistan a choice, they walk away from the radical Islamic parties. So I -- that sends -- my answer to you -- (inaudible) -- I think it is still possible to do something on Pakistan.

The other question onSouth Korea and --

MS. FROST: Afghanistan.

(Off mike commentary.)

MR. MAHBUBANI: Well, I would say on the Kashmiri challenge, incidentally -- and the temperature onKashmir has dropped significantly, by the way. And this, again, is a result of both Indiaand Pakistan realizing that if they continue to play the zero-sum game, they're not going to get anywhere.

And in the case ofSouth Korea, for example, I am, in the long run, bullish on South Korea. And it's clear what the ultimate solution will be, by the way. The ultimate solution will be the German solution. North Korea will eventually merge with South Korea. And there, by the way, one of the best things that New York did was to send its Philharmonic Orchestra to Pyongyang. Believe me, that was brilliant. That was a brilliant move, and this precisely illustrates my point that if a society closed, do not close it more by imposing sanctions on it. Whenever a society is closed, send the New York Philharmonic Orchestra. (Laughter.)

MS. FROST: I would add that sanctions also --

(Off mike commentary.)

I would add that sanctions also set up a black market from which the elite profit enormously and the poor people suffer. The Institute for International Economics, now called the Peterson Institute, has updated its study of sanctions. So I very much agree with you.

We're almost at the closing time. There's one question from a member that I'll put to you, but let's take one or two other questions, then I'll give you the very last word. We're approaching the magic hour of 2:00.

Yes, there and you -- behind you.

Q Rob Morrow (ph), Clarion Capital.

MS. FROST: Stand, please.

Q One of the positions President Obama -- (laughter) -- Senator Obama has taken is a very soft but definitive stand towards protectionism. We've done a fairly close reading of that. And I was wondering how the Asians will respond to protectionism, with specific reference to the China bag, the currency bag.

MS. FROST: Okay, hold that answer just a second.

Yeah, go ahead.

Q Just building on that and your comments -- I'm Jim Ziron -- isn't there a distinction between trade policy and trade? And even if trade policy stagnates and nothing happens in the foreseeable future -- and if Obama is successful, it may stagnate for some time -- won't trade be dictated by market forces? And wouldn't you foresee a much greater liberalization?

MS. FROST: Hold that one moment.

I have to add that I worked at the Office of U.S. Trade Representative for two and a half years. And I do think that every president is propelled toward free trade, broadly defined, because of the nature of the American economy and American interests. All politics is local politics, and all trade politics is sector-specific politics. So when you really get down to it, you're talking, you know, shoes, textiles, steel, you know, cotton and so on. And that's really where the battles in Washingtonare fought.

Before you answer the trade questions, I want to add a question from Robert Ellsworth, which asks about how best to handle China's ambitious military plans. That is, plans for enhanced strategic nuclear forces, surface-to-air missiles -- their space force and their navy and so forth.

This is a dimension ofAsia's rise that you don't spend as much time on, I think, as you do on other aspects. And we certainly haven't paid too much attention to it here. How should we handle China's military plans? So those are your questions, and then you can, you know, conclude yourself with final remarks.

MR. MAHBUBANI: I have two minutes to do all this. (Laughter.) Well, bullet point answer. I mean, the good news about American presidential elections is that American presidents, once they get elected, sometimes forget what they said in their elections speeches. (Laughter.)

MS. FROST: Yes, right.

MR. MAHBUBANI: And there's a long track record of this. I mean, Bill Clinton said he would never coddle the butchers of Beijing. His first priority after he was elected was to establish a good relationship with Jiang Zemin successfully.

MS. FROST: Exactly.

MR. MAHBUBANI: So I think on trade, I hope that this is election rhetoric -- tell you -- (inaudible). But the other point you made, which I think you also supported, you're right. I mean, whatever the trade policies may be, I think if we can at least hold the line on the present trade regime and not retreat from it, it provides a secure enough platform for explosion of trade to continue.

And you're right, by the way, the explosion of trade is carrying on at a phenomenal rate. And one of the most amazing statistics that I got from Larry Summers on my book was that he said, you know, what's happening in Asia today. In the West, when you had the industrial revolution, someone's standard of living would improve by 50 percent in one lifetime. In Asia, it's not improving by 50 percent, it's improving by 10,000 percent in one lifetime, a completely different pace of change.

Final point onChina's military. This is where I come back to my point about this being a very plastic moment of world history, right. It's what the established powers do in response to China's rise that will determine howChina behaves. Believe me, the Chinese do want to engage in a military race. They saw what happened to the Soviet Union, and they learned a big lesson -- that's a -- (inaudible) -- game. Focus on developing the economy.

But if you start a new race, if you start a new space weapons race, believe me, the Chinese will have no choice but to keep pace. So the best thing you can do today at this early phase, before China embarks on any major military expenses, is work out a broad understanding of what kind of military -- understanding you want to have with China. And I think it can be done, because the last thing the Chinese want to do is to engage in a military race because they know they need at least 40 to 50 years to take care of the remaining 6 (hundred million), 700 million people in China who still have a long way to go to catch up and modernize.

MS. FROST: Well, I think you'll agree, we've had a delightful combat. Let's give a hearty round of applause to Kishore Mahbubani. (Applause.)

Thanks very much, Kishore, that was great.

MR. MAHBUBANI: Thank you, thank you.

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THIS IS A RUSH TRANSCRIPT.

February 28, 2008

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MR. MAHUBABANI: (In progress) -- Western minds -- (inaudible). Because I think one of the key goals of this book, which is actually going to be very difficult, is to persuade people in the West who always think that the West is always part of the solution to the world's problems, increasingly the 88 percent of the world's population who live outside the West see the West as the largest source of many of the world's problems. Now, this is a complete reversal of attitudes. Because when you come to discussions at the Council on Foreign Relations, you sit here, you look at the world, and you say, my, God, guys, I don't know what the hell's happening. If we could only fix the world, set things right. How are we going to fix it? All the attitude is the problem's out there, the solution is over here. Really, the most revolutionary premise that I have in the book is that the West must begin to understand that it itself is generating many of the world's problems.

Now, your question was about Asia. It's important to understand that there is something remarkable happening in Asia. It's an amazing thing. And in some ways, I'm glad you referred to Japan. It began with Japan, but Japan's success then inspired the success of the Four Tigers --Korea, Taiwan, Hong Kong, Singapore. And from there, it went to Southeast Asia, and clearly, several Southeast Asian states began to succeed, too.

And then from there, frankly -- and this is what I call the master modernity in the book -- we leapt into China. Because Deng Xiaoping left China, came to Southeast Asia, and said, how come the rest of Southeast Asia is so far ahead of China? China is as good a civilization as anybody else. We should be ahead, not behind. SoChina decided to switch policies. And for the last 30 years,China has had the fastest-growing economy in the world.

Now, from China, when Chinatook off, basicallyIndia then said, why not us? Why can't we do whatChina is doing? And that's what motivatedIndia to open up, to compete. And when I talk of the march to modernity, it's important for me to emphasize that what you have to carry, the visual picture you have to carry in your minds, is our minds, that used to have a certain perspective, opening up and beginning to think hey, we can do it, too, we can succeed, too.

And clearly, the explosion of cultural confidence that we see, beginning with Japan, Four Tigers, Southeast Asia, China India, that is spreading throughout Asia. And the really good news from a Western point of view is that this march to modernity is about to enter the Islamic world. Because the younger Muslims who, in the past, in a sense, had a binary choice, right -- either you follow the road of the West or you follow the road of Osama bin Laden -- now are saying hey, why can't we be likeChina and India? Why can't we modernize? Why can't we have successful economies?

So everybody would like to separate Asiaout into distinct packets. I am telling you that the new story in Asia is how it's all coming together. And you see this in terms of people flows, right. The faster growing people flows are within Asia. The reason by Boeing has great difficulty meeting its production demands is because of demands of aircraft from Asians who want to travel more throughout Asia and China and Japan, China and India, Southeast Asia and China and so on, so forth. These are the new flows inJapan.

So a new Asia is being created even as we speak. And the new Asia basically is going to be a positive addition to the world, because it is creating hundreds of millions of responsible stakeholders who want to have a stake in a stable global order and who don't want to disrupt the global order, who want to work with the West. And the problem that Asians feel is that the West is not ready to accept Asians as an equal partner. And that's why I define it asAsia and the West.

MS. FROST: Well, let's pick up on that point then about world order. You make the statement in your book that Asians are proving to be more capable of delivering a stable world order. And indeed, the record inSoutheast Asia, particularly, is remarkable. And no ASEAN member has gone to war with another since the founding of ASEAN in 1967 and peaceful engagement norms, such as the peaceful settlement of disputes, have made great strides in Asia. But then you make the statement that the Balkans and theMiddle East are really no more difficult to handle than Asia.

So you have to ask, well, is what the Asians are doing transferable to the world order? You state that the Asian mentality is hierarchical, at one point in the book. So if that is so, are you anticipating sort of a hierarchical world order of some kind? You seem, in other places, to be calling, as many of us do, for the reform of international institutions, such as the World Bank and the IMF. And we, I think both of us, agree that the structure and the process does not reflect this new vitality and growth that you mention.

So what would Asians do? What would they do if we succeeded in reforming these institutions? What would they do if we asked them to transfer to the rest of the world some of the lessons they've learned in Asia? Could they get over what I've always seen as a kind of watch-and-wait mentality, a passive quality, reluctance to speak up? What would be different, do you think, if your vision came true?

MR. MAHBUBANI: Well, I'm very glad you brought up the geopolitical dimension. Because one of the more surprising things I say in the book is, you know, you look at regional cooperation, for example, right. And you talk of regional cooperation, and everybody sees the European Union as the gold standard of regional cooperation, and everyone else is second class or third class, and so on, so forth. And it's true in terms of internal economic integration, the European Union is number one and way ahead of anybody else. ASEAN, the Association of Southeast Asian Nations, has a long way to go before it can catch up with the European Union in terms of internal economic integration.

But if you look at the geopolitical performance, the difference between ASEAN and the EU, the way I'd say it, is that EU is an economic superpower, ASEAN is an economic mini power. But in diplomatic terms, the EU is a diplomatic mini power, and ASEAN is a superpower. And how do I explain that? If you look all around the EU, right, everywhere, look at all these borders. Look atNorth Africa, look at the Middle East, look at the Caucuses, look at the Balkans, look at Kosovo today. Essentially, the European Union fails diplomatically when it leaves Europe.

By contrast, the Association of Southeast Asian Nations, which is so much weaker, so much smaller, has been able to create various informal processes that have created an unnatural development in Asia. The unnatural development in Asia is that you're seeing in Asia the emergence of all the great powers, all the new great powers are emerging in Asia. Traditionally, when great powers emerged, you should always see some kind of rising tension and conflict. Instead, in East Asia, you're seeing reducing tension and conflict, not rising. This goes against the grain. And this is a result of what I call Asian geopolitical competence.

And for me, having leftNew York and gone back to Asia four years ago, I find a strange paradox whereby you have the best geopolitical discussions in the world in New York, and I'm sure in this house, you have the best geopolitical discussions. But if you want to see geopolitical performance, you have to go to Asia to see it. And how does one explain this paradox? I mean, the Asians are nowhere near as sophisticated, nowhere near as articulate in expressing their point of view in the way that you would get in discussions in a room like this. And yet, when it comes to performance, they can carry out brilliant geopolitical moves which are amazing.

And I'd mention just two brilliant geopolitical moves, okay. Take China for example. Now, China has obviously decided, is aware that at some point in time it's inevitable the United States might try to contain the rise ofChina. You don't have to be a great genius to foresee that might be happening. But what has Chinadone? Long before the United Stateshas worked out this policy, it's launched a preemptive strike against an American containment policy, and its preemptive strike is to share its prosperity with all its neighbors.

And this explains why the fastest-growing trade flows in the world are not inEurope, not across the Atlantic, not across the Pacific but withinEast Asia. And this affects a conscious decision by China to say hey, I want all my neighbors to be tied to the Chinese economy, we have a stake in China's prosperity.

And the most amazing thing Chinadid was to propose a free trade agreement. This is a state that's still run by the Communist Party of China, proposes a free trade agreement to 500 million people in Southeast Asia. Not only did they propose the free trade agreement, they concluded the free trade agreement in record time. And before the free trade agreement was completed, there was a unilateral, early harvest gift by China to the Southeast Asian states.

Now, compare that with the EU and Africa. Clearly, if anything goes wrong in Africa, European Union is going to suffer. Why couldn't the European Union do something like what China did with Southeast Asia? The European Union is much more advanced, much more sophisticated, much more ahead, but it's China that lances this preemptive strike. So it is things like this that are happening in a real time frame today that are completely transforming the fabric of Asia, and that's not captured in the discussions over here.

MS. FROST: I have to express a little skepticism about these FTAs, the free trade agreements. They are often full of exceptions. And even when there's nominal free trade, local officials in China often block imports. Just ask the Thai farmers. Nevertheless, it is a very forward-looking strategy, and I do agree with you that ASEAN, in particular, has responded very, very well to all of this. What do you think then -- go back to the sort of a broader theme. Do you think Chinese interests are fundamentally incompatible with American interests? Do you think that, for example, that there's only Western values versus Asian interests, and that we're actually promoting our own interests? Or do you think that what we're seeing in Asia is an opportunity for both Asians and Westerners to work out complementary or even converging interests?

I ask this because it's often assumed that Western domination of these international institutions is a facade for Western interests. And this has the ring of truth to it. But then when you think what are Western interests, aren't they free and open markets, aren't they some sort of participatory government or at least an end of really repressive violations of human rights, is there really something so different here?

MR. MAHBUBANI: This is where maybe I should share some good news. (Laughter.) The good news is, you know, I have a line in the book that says that as Asian rises, Asiadoesn't want to dominate the West, Asiawants to replicate the West. And basically, the Asians like the 1945 rules-based order that was an American gift to the world. And indeed, believe me, the Asians are today the biggest beneficiaries of this 1945 rules-based order. And they want this rules-based order to continue. And they don't want to tear it down.

And you know, if you want to try and understand how China and India ought to emerge, all you have to do is study 20th century history where Japan and Germany emerged as great powers twice in the 20th century, once before 1945 when the only way you emerged as a great power was to go out and conquer and colonize, which is what the Germans did, which is what the Japanese did. After 1945, Japanand Germany reemerge as great powers again, but peacefully, played by the rules. Their economy grew, their influence grew, and the world order continued. And if you want a simple model of how Chinaand India ought to emerge, they say we want to emerge like Japanand Germany did after World War II. We'll play by the rules, too, as long as the rules are maintained on a fair and equitable basis.

And here, one of the real dangers that the world faces -- you're right, by the way. The West has done an excellent job of being custodians of many of these international rules. But the reason why the West did a very good job in being the custodians of all these international rules because most Western populations believed for a long time that on a level playing field, the Western economies would compete and win with no problem. All of you open up your doors, open up your economies, let's compete, don't worry, let the best man win.

Today, we have this strange situation where the Western rhetoric continues to be open up, compete, open up, compete. You look at the populations and you look at the internal discourse both in Europeand America and it has this tremendous fear of international competition. And this is why someone like Lou Dobbs has an enormous amount of resonance in America. He gets a lot of play, because people are afraid of losing jobs to the Chinese and Indians. And this is going to create, in a sense, a major challenge for the world.

This is why the moment we are in today in world history is one of the most drastic moments ever. It's the decisions we make in the next five to 10 years on how you respond to the rise of China will be able to determine the course of 21st century history. If the West suddenly gets frightened of this competition and begins to retreat from international trade liberalization, then I think we are in trouble. Then we're going to retreat from the model of Japan and Germany emerging and playing on a level playing field. The West can continue to say, hey, no, we will maintain these rules, even if we do not appear to be the primary beneficiaries.

Believe me, I cannot see a scenario where America and Europe cannot compete with the rest of the world. It's impossible. You have the world's best universities. You have the world's best companies. You have tremendous resources in Americaand Europe. I don't see how you can possibly not be able to compete withChina and India, but amazingly enough, the populations are losing confidence in the West. And I hope that, frankly, a way can be found to restore this confidence, because you need this confidence in building a new world order which accommodates the rights of Asia.

MS. FROST: Before opening it up, let me just make a couple of final comments. First of all, I really applaud the inclusion of India in your book. I included it in my book. There's a tendency not to takeIndia seriously. And it's obviously starting from a lower base and has massive infrastructure and other social problems. But I do wonder if it's always wise to think in terms of nation states. We all see trans-border, global opportunities and threats. But even more than that, in my book, I looked atAsia from space, as it were; I mean, literally from a NASA photograph. And what you see is I believe the resurgence of an older maritimeAsia, the Asia of coastal communities and ports. And that's where the wealth is. That's where the investment is. That's where the flows of people are.

And you see that particularly -- or also in southern and coastal India. India as a whole doesn't add up necessarily to very much. But the dynamism, I think, in these coastal regions is quite striking.

One final comment I'd make about what you see as the erosion of free trade ideology in the West. I think maybe you have a tendency to hold the rest of the world constant and then just to look at statements of Americans or Europeans. It isn't just that these new economies have entered into the world economy. They've discovered the use of anti-dumping. Their economies are often riddled with subsidies. There's a lot that doesn't correspond to the pure market's ideology of the (get ?). And I think that that accounts, in part, for this rising sense of threat.

And the other is that absence, in this country anyway, of effective adjustment mechanisms, whether it's wage insurance, portability of pensions, portability of health care, effective adjustment assistance retraining, you name it, we really don't have it. And I think that if I were a steelworker and lost my job, the economists could tell me that oh, our unemployment rate is so low. But for me, the unemployment rate would be 100 percent. And I think it's the tendency to think of trade in a box when in fact the world is becoming more integrated. That is the problem here.

At this time, let me open up the conversation to members here in the audience. I'd like to ask all of you to wait for the microphone. And we have a question here in the front.

If you could start coming.

Please stand and give your name and affiliation, and limit yourself to one question only, if you please. That's a Council rule.

Q I'm Mark Engleson (sp), I'm the chairman of -- (inaudible) -- Partners.

Your Excellency, we're going to have, as you well know, an election in the United States in November. Could that election change the primary premise of your book if it turns out a certain way? What will be the messaging toAsia from the United States?

MR. MAHBUBANI: Thank you. By the way, I'm no longer an excellency. (Laughter.) I'm a has-been.

MS. FROST: You're merely excellent.

MR. MAHBUBANI: I have to emphasize that because, I mean, I'm enjoying the pleasures of giving up diplomacy and practicing how to be undiplomatic. (Laughter.) So please don't hold theSingapore government to any of my views that I'm saying.

Now, clearly, I mean, actually, I wrote a column for Newsweek International, which amazingly got an enormous amount of attention, which said that the election of one candidate would remove half of the entire Americanism in the world. And this candidate, of course, is Barack Obama. It's pretty obvious, you know. I mean, clearly, I mean, Africais going to jump up for joy and celebrate. You have no idea the impact it's going to have, you know. And I think it's also going to have a significant impact even on the Islamic world, too, with Obama's election.

But I'll tell you, one of the most amazing things that happened to me was I was about to appear on a Bloomberg TV program. You know, here I'm a pundit on Asia. In Asia, I'm a pundit on America. (Laughter.) The night before I was supposed to have -- be on a Bloomberg TV program, I had dinner with one of the richest men in India. And I can't give his name. But anyway, so I asked him, I said, listen, I'm going to Bloomberg tomorrow. I'm going to talk about the U.S.elections. Which candidate should I support? And to my absolute surprise, this guy, you know, he's an amazing capitalist, said, Kishore, root for Obama, root for Obama! And that, for me, was an eye opener, you know? You know, I expected the support from Obama to come from different sectors. To come from a billionaire in Indiais really quite amazing.

But I would think that that would get rid of half of the anti-Americanism while the other half remains. And many of the problems that America had with the world predated the Bush administration. And as you know, Osama bin Laden didn't plan his attacks on 9/11 just after Bush was elected. The first attack on the WorldTrade Center was in 1992. There's still some powerful structural problems in America's relations with the world that have to be resolved, okay.

There is still, by the way, in the world, enormous reservoirs of good will towardsAmerica, believe me. People are aware of the good that Americahas done for the world. It is specific American policies that's caused a lot of problems. And frankly, if you want me to name you -- name one policy, if you want a magic bullet to solve a lot of America's problems in the world, solve theMiddle East problem, believe me. (Laughter.) I'm not kidding.

MS. FROST: Yeah, I know, I know. We try.

MR. MAHBUBANI: It is the one magic thing you can do to get rid of doing that. Because the rest of the world sees -- and this is important for you to know this -- they perceive you to be the big obstacle in solving this problem. They may be right, they may be wrong. But this is how the world perceives you. And if you are unaware of that then clearly -- (audio break) -- aware of what the real world thinks of America.

The amazing thing is that we have a solution in the Middle East. Bill Clinton Taba accords combined with the Arab League peace proposal has given us the best possible moment to bring about peace in the Middle East.

Plus, you have a situation today where ironically the biggest result of the American invasion of Iraq is that Iran's stature has risen. The Arabs are frightened of Iran now. They don't mind having Israel as another geopolitical player. This creates a wonderful opportunity to work out a peace deal. Now this is where geopolitical competence is so important. You could have the best geopolitical discussions in the world. It's what you deliver in deeds that matters the most.

And many people see that today we have a unique opportunity to work out a deal in theMiddle East. And they are amazed that this opportunity has not been taken. Because if you take it, you solve the Middle East, you slice off another half of the remaining anti-Americanism, believe me.

MS. FROST: I have to agree with that.

Yes, this lady here.

Q Thank you. My name is Joanna Weschler with Security Council Report.

In your book, you say you have some harsh words for the council, especially it's lack of accountability. I wanted to ask you a twofold question. I hope the chairperson will allow me. One, in the five years, I guess, since you left the council, has there been any change, either direction, in that department? And the second question to you, the optimist, do you think that there will be a significant change in the Security Council, including its composition, anytime soon?

MS. FROST: At first I thought you were talking about the Council here. (Laughter.)

Q No, I'm sorry. Security Council Report is my organization, so I have a one-track mind.

MS. FROST: I understand.

MR. MAHBUBANI: Well, should I be politically incorrect and say maybe the Council on Foreign Relations also needs reform? (Laughter.)

For the Security Council, I mean, this is the tragedy that we have today in the world, you know. Because if you want to fix the world, it's actually not very difficult in terms of principles, okay. The founding fathers of the U.N. did something brilliant. They said that the League of Nations died, because the great powers were not given a special stake in the League of Nations. So in the United Nations, they gave the great powers a special place by giving them the veto power in the U.N. Security Council. And I think in principle that's a good idea.

But I think what the founding fathers had in mind was that you should have the great powers of the day (for ?) the great powers of tomorrow are not the great powers of yesterday. And today what you have in the U.N. Security Council is the great powers of yesterday who, unfortunately, refuse to make way and adjust and give way.

So if you really want to see Security Council reform, looking at the candidates, which countries should come in, which countries shouldn't come in, look at the principles upon which you want to do your reform. And the principles are very clear.

First of all, you want to ensure that the great powers of tomorrow that are there and the great powers of yesterday.

Two, you want to create an institution that is much more accountable than it has been in the past. And having served two years in the U.N. Security Council, if you are looking for one of the most closed, opaque organizations in the world, that's the U.N. Security Council. Believe me. The world doesn't really know what goes on because, you know, I always said to compare the Security Council to an onion. There are many layers, and the closer you got to the center, the more you began to tear, you know. (Laughter.)

Then you begin to discover how decisions are really made in the council. And it's all, unfortunately, through a series of tradeoffs within one side against the other side, you know. You know, you scratch my back, I scratch your back. You claw my back, I claw your back. And so basically, the peace side make all kinds of trades among themselves. Sometimes it results in good decisions. Often it results in bad decisions.

So, I mean, Joanna, my answer to you is the Security Council needs to be reformed. It can be reformed but not along the present route that is being taken.

Yeah.

MS. FROST: Here's a question from Susan Roosevelt Weld at HarvardLaw School.

It seems that theUnited States can handle Asia's peaceful rise if funds and political emphasis are redirected from the Department of Defense to the Department of State and a revived USIA. I think there's a missing period there. If this redirection takes place, what will the Asian nations do to reassure Americans, who are still somewhat anxious about the 9/11 attacks, that such a redeployment of resources will not be seen as weakness and an invitation to abandon the strategy of peace?

MR. MAHBUBANI: Well, I don't advocate -- well, even though I have left diplomacy and I'm not a peacenik, I actually believe that military expenditures will carry on. And frankly, in my second book, Beyond the Age of Innocence: Rebuilding Trust Between America and the World, I mean, I actually did say on record that the American military is a gift to the world. Because it is the American military that keeps international sea lanes, international air ways open for trade and people and goods to flow around the world. So clearly, you do need to have some military capability. But the question is whether you need so much.

And the one area, frankly, I would advocate something be done is in the area of nuclear weapons. I just don't understand what security you're getting with 26,000 nuclear weapons. I mean, it's absurd. And the danger here is that one of the most effective treaties since World War II is a nonproliferation treaty. I mean, yeah, few nuclear powers have emerged, okay --Israel, Pakistan, India -- but by and large, we have kept the nuclear genie in the box -- by and large. Of course, you know, we didn't get the 20 to 25 nuclear weapon states that we anticipated would come about.

The danger we face today, and this is a very real danger, is that the NPT is legally alive but spiritually dead or dying. And one reason why it is dying is because there's a perception among many countries in the world this is always an unfair treaty. It was nuclear apartheid, okay. Five states could have legal nuclear weapons the rest couldn't have. But never mind.

But as part of the deal, the nuclear weapon states gave an explicit commitment to reduce their nuclear arsenals and to, you know, not modernize them. That's what the opposite is happening. Why? I mean, these nuclear weapons are not going to buy you any additional security. But the death of the NPT will create greater insecurity for you.

How is it you can do something so illogical, how can the world's best-educated country, the best-informed country, end up doing something which is completely illogical and unnecessary for the world?

MS. FROST: I agree with you, and I think this is one of the strongest parts of your book. I would only add that I think the United Statestends to focus overwhelmingly on the supply of bad things and not the demand for bad things, and that would include narcotics as well as nuclear weapons. What is it that gives rise to the demand for nuclear weapons, and what can we do to create alternate incentives?

I have been neglecting this part of the room -- way in the back. Try to keep questions and answers short.

Q My name is Jim Dingaman. I'm from the INM World Report.

Earlier in your talk, you talked about the question of trade, the rise of China and India as an issue that the United States will have to come to grips with in the next 10 years. And also you talked about Lou Dobbs. I was wondering, if you look at the Ohio primary, one of the key issues there is the question of NAFTA. And Lou Dobbs may be the tip of the spear, but there's been several decades of deindustrialization in the United States. There has been a decline in incomes in working-class and middle-class incomes throughout the country. How does that factor in your perception of perhaps resentment towards China and India in a populist sense in America?

MR. MAHBUBANI: Yeah, actually, I'm very glad you raise the question, because I forgot to respond to a critical point you made, Ellen.

And you used the word adjustment by the way. And I think, clearly -- I don't think you can reverse the costs of globalization by the way. No matter what we do, globalization is going to grow by leaps and bounds. In fact, you're going to see, by the way -- another prediction I make in the book was that you'll see the Asianization of globalization and so on and so forth.

But the result of all this is that all of us have to adjust to the new competition that is emerging. That is,Singapore has to adjust to it, you know. Singapore is a high wage country, in fact, one of the highest in Asia. But when the Chinese begin to produce textiles, when the Chinese begin to produce cheap toys, don't both to compete with them. Don't even try. There's no way you can compete with them. We have to move up the value-added ladder.

And of course, it was one of the great European economists Schumpeter who said that with capitalism you have created destruction. And when Ford invents the auto car to stop producing horse and buggies, okay. Economics change, you have to adapt.

But the challenge we have, and this is a major challenge, is that people at the bottom of the society are going to have a very hard time adjusting to globalization. And every society will have to develop some kind of social safety net to take care of people at the very bottom. And Singapore decided to do that, by the way. I mean, we don't announce it, but you can see, effectively, the government giving all kinds of ways and means, you know. They don't call it welfare, they call it workfare. But they make sure that the people at the bottom get something to do.

If you lose your jobs to Chinaand India -- and you will lose jobs toChina and India. It's inevitable. It's just the result of the whole global economy changing. You've got to create new opportunities, and you have to create a new ability for the workers to respond. And I think this is what all of us need to think about, how each one of us look for the right safety net for our societies.

MS. FROST: A question from this side of the room. Yes, back there.

Q Rick Smith from Newsweek, your occasional publisher. (Laughter.)

Kishore, I know that you lost patience with American moralizing a long time ago. And you've said that afterGuantanamo and Abu Ghraib that the U.S. has nothing to offer in terms of international human rights standards. What role, if any, in your view, does a discussion of human rights, what place does it have in international diplomatic discussions?

MS. FROST: That's a very key point. And are there any other questions that are related to that?

Okay, Kishore, go ahead.

(Off mike commentary.)

Okay -- (inaudible) -- democracy.

MR. MAHBUBANI: I know.

(Off mike commentary.)

Sure.

(Off mike commentary.)

MS. FROST: That is one of the questions from the national membership. From Kara Tanballa (sp) in Lawrence, Kansas -- in view of the ASEAN's failure to affect the policies of Burma, Burma's ruling junta, what can ASEAN do to contain Chinaand its transition to a global political power? Is the United Statesexpected to do all the heavy lifting?

There were three or four questions wrapped up together there, but let's take -- (inaudible) -- and your comment about human rights and democracy.

MR. MAHBUBANI: Well, I certainly hope, by the way, that we live in a world where there's greater respect for human rights, you know. I mean, I always keep saying, you know, Asians don't like to have their nails pulled out. Asians don't like to disappear at night. Asians don't like arbitrary detentions. Believe me, as Asian societies progress, they also want to see greater respect for human rights.

And on democracy, I can also assure you that most Asians realize that the end destination is clear. That all societies eventually will have to evolve, in one way or another, towards democratic society. The destination is not in doubt. The only question is the route and how you get there.

Now, if you want to know what the big change needs to be done, Rick. I mean, many people in the West are not aware of how they come across to the rest of the world when they speak about democracy and human rights. There's a tremendous amount of arrogance and smugness that comes through in discourse of democracy and human rights, which completely destroys the message that you're trying to convey.

But if the West can learn to both talk and listen and you go from a one-way street of ideas to a two-way street of ideas, then I think you can have a better discourse on issues like human rights, on issues like democracy and so on, so forth. And believe me, if the State Department still wants to produce annual human rights reports on every country in the world exceptAmerica, we should begin the human rights report, give it credibility and say we, in the United States, we practice torture. We have done so since this date. This is our view now on human rights. Fair enough. You put that on record as your position, and then people will say okay, now you can judge us and tell us what you think we are doing wrong.

In terms of the history of human rights, the way I see it, there were two great leaps forward. One was the abolishment of slavery -- and today, I think it's inconceivable to any of us that we would ever return to conditions of slavery; the other great leap forward was the move towards abolishing of torture. And if you had asked me 10 years ago when I arrived in New York, can you conceive, Kishore, of the possibilities that some day the great defender of democracy and human rights, the United States, would one day practice torture, I would have said to you no way, not possible, never the United States.

But for the -- Amnesty International to declare that Guantanamo is the Gulag of our times, it had a metaphysical impact on the world that I think not many were just not aware of. But a discourse on human rights and democracy should continue but in a different way. And I hope that it will continue.

Now, let me turn toMyanmar or Burma. And I would admit clearly that Myanmar or Burma is one of ASEAN's big failures, really. We tried and we failed. Are you happy now to hand over the problem back to you, by the way? (Laughter.)

(Off mike commentary.)

And you know, I had breakfast about 10, 12 days ago with the grandson of Utan (sp), you know -- (inaudible) -- who has written a book on Burma. And he said, the great tragedy of this Western policy of imposing sanctions on Burmais that you completely have given Burmainto the arms of the Chinese, totally. And in 20 years where you could have had some kind of Western influence inBurma is long gone. The sanctions just do not work.

And indeed, all that sanctions do is that they make you feel good, because you feel like you've done the right thing, but they do no good. If you want to do good, then you have to engage the societies and deal with an adversary.

Now let me -- one important point, let me turn to another country which is, across the country, very much in everybody's minds today -- Iran, right. Iran is one of the biggest preoccupations of policymakers here. And one of the, I guess, more provocative things I said in my book is that, you know, diplomacy was invested 2,500 years ago not to enable you to talk to your friends. You don't need diplomatic immunity to talk to your friends. You need diplomatic immunity to talk to your adversaries, your enemies. And the Greek and Persians did that 2,000 years ago.

Today, the world's most advanced state cannot do what our ancestors could do 2,500 years ago just to establish diplomatic relations with an adversary. IfIran is an adversary, fine, establish diplomatic relations. That's what diplomacy was invented for. But you cannot put across this simple, commonsensical advice in Washington, D.C., because that option is closed. Now that's an example of what I call, if you look in terms of geopolitical competence, this is how you judge it. Believe me, if you want to transform Iran, if you want to do something about it, do what they did 2,500 years ago, establish diplomatic relations.

MS. FROST: Yes, I agree. I'm going to bunch some questions now.

Here in the front -- two or three questions. Would you like to stand? And here's the microphone coming. Yeah.

Q Kishore, hi, I'm Kent Sorenson.

All -- wise -- wise as always. Your survey of Asia talked about challenges, mostly economic, from China, India, Japan. You've even worked in Myanmar and Iran. What about Pakistanwhich I think in the next couple of years may be higher on the U.S. agenda than any other part ofAsia?

MS. FROST: Okay, just hold that for a moment. And we had a question right here. Did you -- no? Okay. There was someone back there.

Q James Tunkey, I-OnAsia. Nice to see you again, Kishore.

My question builds on Mr. Sorenson's. You've laid a challenge for the West to solve the Middle East. With the withdrawal, hypothetically, of U.S. troops from South Korea or our funding of the Pakistani government, how would ASEAN solve either challenge?

MS. FROST: Why don't you enter those two.

MR. MAHBUBANI: Okay. Let me -- Pakistan, by the way, is a very good question to ask. And I was inPakistan for the first time last September -- September 2007. And I went there because I'm ethnically Sindi. And I went to discover the home that my mother grew up in Hyderabad, and I had never seen it, so I saw it for the first time in my life. And I expected that as a Hindu Sindi I would receive some kind of, you know -- you know how bad the partition was, right, withIndia and Pakistan. Millions died. I thought I would at least receive some degree of animosity towards Hindus -- zero. This is stunning to me, first off.

And secondly, if I look -- and I talked to the young people in Pakistan. It was very clear what their vision of the future was. Their vision of the future was to do what Chinaand India had done, open up and modernize. And I'd give one simple, classic example of how there's hoping for Pakistan.

There's a campus inMalaysia which I knew. Forty years ago, I went there. None of the Malay Muslim girls 40 years ago wore any hijab in the Malaysian campus. Today, you go to the Malaysian campus, 99.9 percent of the women wear hijab in Malaysia. Now, you go to a similar campus in Lahore, Pakistan -- (inaudible) -- guess what? Less than 50 percent of the women on the campus were wearing the hijab. It's wonderful. You walk in there, it's just like an American campus.

You know, the Pakistan story, I believe -- this is why I think that the most of domestic message in my book is about ensuring that the march to modernity goes into the Islamic world, too. And I think it can be done. I think that Muslims want that to happen. And a country like Pakistan would be a classic example for that happen. They've got to go through some painful political changes. But you look at the recent elections, the extremist Islamist parties lost votes significantly. When you give the people of Pakistan a choice, they walk away from the radical Islamic parties. So I -- that sends -- my answer to you -- (inaudible) -- I think it is still possible to do something on Pakistan.

The other question onSouth Korea and --

MS. FROST: Afghanistan.

(Off mike commentary.)

MR. MAHBUBANI: Well, I would say on the Kashmiri challenge, incidentally -- and the temperature onKashmir has dropped significantly, by the way. And this, again, is a result of both Indiaand Pakistan realizing that if they continue to play the zero-sum game, they're not going to get anywhere.

And in the case ofSouth Korea, for example, I am, in the long run, bullish on South Korea. And it's clear what the ultimate solution will be, by the way. The ultimate solution will be the German solution. North Korea will eventually merge with South Korea. And there, by the way, one of the best things that New York did was to send its Philharmonic Orchestra to Pyongyang. Believe me, that was brilliant. That was a brilliant move, and this precisely illustrates my point that if a society closed, do not close it more by imposing sanctions on it. Whenever a society is closed, send the New York Philharmonic Orchestra. (Laughter.)

MS. FROST: I would add that sanctions also --

(Off mike commentary.)

I would add that sanctions also set up a black market from which the elite profit enormously and the poor people suffer. The Institute for International Economics, now called the Peterson Institute, has updated its study of sanctions. So I very much agree with you.

We're almost at the closing time. There's one question from a member that I'll put to you, but let's take one or two other questions, then I'll give you the very last word. We're approaching the magic hour of 2:00.

Yes, there and you -- behind you.

Q Rob Morrow (ph), Clarion Capital.

MS. FROST: Stand, please.

Q One of the positions President Obama -- (laughter) -- Senator Obama has taken is a very soft but definitive stand towards protectionism. We've done a fairly close reading of that. And I was wondering how the Asians will respond to protectionism, with specific reference to the China bag, the currency bag.

MS. FROST: Okay, hold that answer just a second.

Yeah, go ahead.

Q Just building on that and your comments -- I'm Jim Ziron -- isn't there a distinction between trade policy and trade? And even if trade policy stagnates and nothing happens in the foreseeable future -- and if Obama is successful, it may stagnate for some time -- won't trade be dictated by market forces? And wouldn't you foresee a much greater liberalization?

MS. FROST: Hold that one moment.

I have to add that I worked at the Office of U.S. Trade Representative for two and a half years. And I do think that every president is propelled toward free trade, broadly defined, because of the nature of the American economy and American interests. All politics is local politics, and all trade politics is sector-specific politics. So when you really get down to it, you're talking, you know, shoes, textiles, steel, you know, cotton and so on. And that's really where the battles in Washingtonare fought.

Before you answer the trade questions, I want to add a question from Robert Ellsworth, which asks about how best to handle China's ambitious military plans. That is, plans for enhanced strategic nuclear forces, surface-to-air missiles -- their space force and their navy and so forth.

This is a dimension ofAsia's rise that you don't spend as much time on, I think, as you do on other aspects. And we certainly haven't paid too much attention to it here. How should we handle China's military plans? So those are your questions, and then you can, you know, conclude yourself with final remarks.

MR. MAHBUBANI: I have two minutes to do all this. (Laughter.) Well, bullet point answer. I mean, the good news about American presidential elections is that American presidents, once they get elected, sometimes forget what they said in their elections speeches. (Laughter.)

MS. FROST: Yes, right.

MR. MAHBUBANI: And there's a long track record of this. I mean, Bill Clinton said he would never coddle the butchers of Beijing. His first priority after he was elected was to establish a good relationship with Jiang Zemin successfully.

MS. FROST: Exactly.

MR. MAHBUBANI: So I think on trade, I hope that this is election rhetoric -- tell you -- (inaudible). But the other point you made, which I think you also supported, you're right. I mean, whatever the trade policies may be, I think if we can at least hold the line on the present trade regime and not retreat from it, it provides a secure enough platform for explosion of trade to continue.

And you're right, by the way, the explosion of trade is carrying on at a phenomenal rate. And one of the most amazing statistics that I got from Larry Summers on my book was that he said, you know, what's happening in Asia today. In the West, when you had the industrial revolution, someone's standard of living would improve by 50 percent in one lifetime. In Asia, it's not improving by 50 percent, it's improving by 10,000 percent in one lifetime, a completely different pace of change.

Final point onChina's military. This is where I come back to my point about this being a very plastic moment of world history, right. It's what the established powers do in response to China's rise that will determine howChina behaves. Believe me, the Chinese do want to engage in a military race. They saw what happened to the Soviet Union, and they learned a big lesson -- that's a -- (inaudible) -- game. Focus on developing the economy.

But if you start a new race, if you start a new space weapons race, believe me, the Chinese will have no choice but to keep pace. So the best thing you can do today at this early phase, before China embarks on any major military expenses, is work out a broad understanding of what kind of military -- understanding you want to have with China. And I think it can be done, because the last thing the Chinese want to do is to engage in a military race because they know they need at least 40 to 50 years to take care of the remaining 6 (hundred million), 700 million people in China who still have a long way to go to catch up and modernize.

MS. FROST: Well, I think you'll agree, we've had a delightful combat. Let's give a hearty round of applause to Kishore Mahbubani. (Applause.)

Thanks very much, Kishore, that was great.

MR. MAHBUBANI: Thank you, thank you.

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