MS ORTAGUS: So we’ll do the usual. He’s got an opening statement, and then we’ll dive right into Q&A. And we’ll go from there. Go ahead, Keith.
UNDER SECRETARY KRACH: Okay, great. Well, thanks for having me back. I appreciate being here. And it’s really nice that Morgan came in after a lot of travel, getting in, what, early in the morning.
MS ORTAGUS: What time did we land? 2:00?
QUESTION: Yeah. Let me tell you my story about getting home from Andrews. Oh, my God. (Laughter.)
MS ORTAGUS: This is an on-the-record transcript. I’m sure. (Laughter.) Go ahead, Keith. Sorry.
UNDER SECRETARY KRACH: All right. So since the first of the year, I’ve been busy. Started off with a bang and a pop, tore bicep muscles. My eight-year-old daughter doing gymnastics, totally heroic. But then hosted the Secretary out in Silicon Valley for four days, and then went on to Davos with the presidential delegation with Ambassador Lighthizer and O’Brien and Secretary Mnuchin and a few of the other cabinet members.
So let me just start off with the Silicon Valley trip. First of all, it was great to bring together my Silicon Valley family, because I know so many of the CEOs out there after spending 30 years there, with the State Department family. And we did a number of things. One of the things that we did is we brought in 36 CEOs to my home for dinner, and the Secretary talked about the China challenge, and then we had everybody go around the room and talk about their experience and what they would do if they were secretary of state. Also, I think as you guys saw, he also gave a China policy speech at the Silicon Valley Leadership Group with about 350 folks there. And that Leadership Group is a – it’s a bipartisan group that really focus on promoting technology and working with Washington.
And then we also had a roundtable of university leaders. So we had about 15 university leaders, either presidents or vice chancellors. We had one of the guys who – the person who facilitated was Dr. Mung, who I brought into the State Department in December. He was the dean of engineering at Purdue. He specializes in 5G, reads and writes Chinese, three-time entrepreneur, won the Waterman Award. We’re really lucky to have him. And in all these engagements, it’s crystal-clear that everybody understands that economic security is national security. And particularly guys in Silicon Valley, they understand that in the 19th century the guaranteer of – guarantor of strength was steel and steam; 20th century it was the atom and the electron; and now it’s silicon and data.
The other thing that they also get, and it was a big theme – and I always used to say this out in Silicon Valley – is corporate responsibility is social responsibility, but also corporate responsibility is national security, global economic security. And we talked about some of the things that we could do that were synergistic together. And they understand that the threats to democracy and actually their businesses in particular are real and urgent, and they also understand that there is strength in unity and solidarity. Everybody had some type of a retaliation story or intellectual property theft story, something like that, and so they totally get that. Some of them have some big business in China, so it varies across the map. But nevertheless – and the thing I always say at the State Department – is these CEOs are patriots. And so many of them said, “Hey, whatever you need, the answer is yes.”
And that was a similar takeaway in terms of the trip to Davos. So out there I met – and I’ve been going to Davos for exactly 20 years. Twenty years ago, they gave me the Technology Pioneer Award. And it’s a great forum for CEOs but also country leaders. And I can tell you it’s a lot easier when you’re going with the United States State Department than when you’re a startup company trying to get everybody’s attention. And it’s almost like speed dating, so to speak.
But out of the gate, the President gave the opening remarks, and I’m sure you all have seen those, where he talked about pro-growth policies and the results of that. And what was interesting because of the success of the economy, when it comes to the stock market being at an all-time high, GDP growth faster than in any other developed country, record unemployment in all the demographics, closing the income gap, and all that, it actually created an American model, because a lot of the folks that are there, a lot of the country leaders that are there, particularly from developing nations, they’re comparing us to the China model. So it created a – it really created a great platform.
So a big thing that both had in common is that it highlighted the need to come to drive unity and solidarity in terms of different countries, in terms of companies, and something to coalesce by. And so that’s why we’re rallying. These stakeholders in the – what I talked about in the previous two times, and that is the economic trust network. And just to review that really quickly, that is countries, companies, civil societies coming together in areas of digital infrastructure, energy, research, investment, trade, commerce that operate under trust standards that we would call in the U.S. American values. Europeans would call them democratic values, but really probably more translatable globally, and particularly in Asia, would be trust principles. And that would be integrity, accountability, transparency, reciprocity, respect for rule of law, respect for sovereignty of nations, respect for property of all kinds, respect for human rights, respect for the planet. And so that – we’re really building that coalition.
And it also allowed us to advance our three pillars, and the three pillars again really quick is really leading through the model of freedom and pro-growth policies, innovation, and optimism. And that was clearly reflected in the President’s remarks.
The second one is leverage the innovation and resources of the private sector to advance global economic security and prosperity and peace around the world. And there’s a lot of things that we can do synergistically, act as catalysts, to drive that.
And then that third thing is – and if you want – is the economic trust network. And that – the whole purpose behind that is level the playing field. And that is kind of the umbrella, the brand, where all of these different initiatives that we’ve been working on in terms of the Crece program, MESA, Indo-Pacific, Asia EDGE, JUSEP, JUSDEP, is to kind of give it that overarching brand we’re bringing into the – the different countries.
So the Davos trip was – it was really – it was a great trip for me because it allowed me to hit so many different countries. I probably talked to 10 foreign ministers or prime ministers or economic ministers and a lot of CEOs.
And then last week we kind of extended that with – we had a meeting with the Blue Dot Steering Committee. And the way to look at the Blue Dot Network – that’s another one of those names – is the infrastructure trust standard in terms of a lot of these projects that are going on around the world, they have multi-stakeholders. We launched that in Bangkok with Japan and Australia, and we brought in the G7 countries. So it was Australia plus it was France, Germany, UK, Italy, Canada, and Japan, where we further defined those. I announced that we’ve – we have the funding for that, the United States is funding that, and we kicked that off.
And then also today I went over and I spoke to the B7. So these are the federate – these are business leaders who run the federations, like AmChams. It was over at AmChams. That’s the way to look at it, where we further talked about the economic trust network. And the big two-ton elephant in the room is the China challenge and all that, so they’re right there with us.
So that’s a quick summary. I’ve been involved with the State Department team on the coronavirus. And the only thing I’ll say about that, because there’s disciplined communication channels for that, is coming in from my first time serving in government, I really – it’s really amazing for me to see the State Department interagency work like a machine on this and to protect the U.S. citizens. So that’s just amazing to watch that in action.
So with that, I’m happy to take any of your questions.
QUESTION: Can I?
MS ORTAGUS: Go ahead.
QUESTION: You talked about how everyone in Silicon Valley, or all the executives who were there and met with you and the Secretary, are all on board with – on the threat posed by China, particularly on the 5G advanced networks.
UNDER SECRETARY KRACH: By the way, I would say this: Not in the area of 5G for sure. I think everybody is united on that.
QUESTION: Well, not when it’s – contrast that, though, with what you found at Davos and in – maybe not among business leaders, but the EU did not exactly come out and ban Huawei. The Brits really kind of – I don’t know what you want to call it, but they did not heed the pretty dire warnings that they were being given from their special —
UNDER SECRETARY KRACH: Yeah. You know what’s interesting about that is when you’re in a room alone with them, it’s a little bit different. And you’re right about the UK, kind of getting mixed signals from there. And everybody – this is interesting because everybody goes, “Oh, well, we’ve set an agreement, no backdoor.” “Well, just put it on the nonsecure part of the network.” “Oh, it’s really technical.” For a guy who’s been in the software business for 30 years, there’s nothing technical about this. The fact is there’s no need for a backdoor. There’s a front door every day, because the software is being updated every couple of days. Anybody could slip in anything they want, number one.
Number two, in the country of China, they have the National Intelligence Act, which requires any company – state-owned or otherwise – or any citizen to turn over any information, proprietary technology, intellectual property, or data to the Chinese Government and the party, or suffer the consequences. And then the other thing they talk about is, oh, well, it’s a – the price is so much less. And my response always is, when I talk to the telcos is: “They’re charging you for it?” Because a lot of countries, they’re just giving it away. Why are they giving it away? It’s because they want the data. And as far as just put it in non-core areas, you got to look at it as it’s a system. So think of it as a necklace with chains. It’s only as strong as its weakest link.
So we’re busy out there educating on that, and we’re analyzing what does this mean for the United States in terms of bringing in network traffic.
So yeah. Some of these countries are – they’re – China is a big part of their trade, right, and all that.
QUESTION: Right. But I mean I guess —
UNDER SECRETARY KRACH: They’re trying to walk the line .
QUESTION: Are you hoping that maybe people who are in the industry can – in Europe in particular, but also elsewhere – can convince governments that – people that understand what you just said, the threat, will be able to convince maybe not-as-savvy government officials that this is a bad idea?
UNDER SECRETARY KRACH: Yeah. And so here’s what the – it boils down to one question, and one question only, particularly for the European telcos: Who do you trust? Because the folks with the keys are Nokia, Ericsson, Huawei. So do you trust two European vendors or do you trust China? That’s the question that they have to answer. It’s really – it’s not complicated at all.
MS ORTAGUS: Anybody? Carol?
QUESTION: I can’t remember if this was in Davos or in Silicon Valley, perhaps both places – you said you had discussions with these executives who said just tell us whatever you need, we’re on board, we’re patriots. Was the talk all about China, or was there any talk about Russia seeking to hack maybe this upcoming election as well, and about preventing the massive spread of disinformation? Or was it all about China?
UNDER SECRETARY KRACH: It’s interesting, when you’re in a business environment, it’s really all about China. They know the Russians do cyber hacking, there’s Russian criminals that do that. But they understand with China it’s not just hacking. It’s intellectual property theft. It’s building over capacity. It’s subsidies. It’s physically stealing it. I mean, whether it’s in our research institutes or universities, or in the companies themselves, or it’s retaliation. Like, you – the perfect example was the NBA, of course. A seven-word tweet and a hundred million dollars worth of sponsorship were dropped in 24 hours by state-owned Chinese companies. And then calling up the CEO and asking him to fire the general manager of the Houston Rockets. And there’s a lot of retaliation out there, and I think we just see a small fraction of it, because they kind of get – it’s kind of divide and conquer time. And that’s where there is strength in unity and solidarity.
Yeah, but it’s really about China.
QUESTION: Can I just piggy-back off of that? With regard to them making a proclamation like that, we’ll do whatever you need us to do, what are you guys asking them to do right now?
UNDER SECRETARY KRACH: Yeah. A bunch of things in terms of help us out, in terms of transparency. For example, we just signed phase one of the trade deal, and there’s a lot in there that goes with intellectual property as well as anti-piracy. So let us know what’s going on. Be our eyes and ears on that. It’s kind of in your best interests. We just kind of need to know. And the other things as well as – what are some of the things that we can do to accelerate innovation in this country? And obviously, a lot of things come up along the lines of STEM education, training the workforce, create some public-private sector funding, and some things that we can do that will enable them for some critical innovation that takes a long term, help them out in terms of that 90-day shot clock they’re on in terms of earnings and those kind of things. So that is – that’s such a big part of it.
QUESTION: And can I ask one more question? On the Blue Dot Network, why do you guys think it will be impactful? Because my understanding is that it doesn’t have any financial incentive to it. It’s just essentially a stamp of approval. So why do you think it will work the way that you want it to?
UNDER SECRETARY KRACH: Yeah. By the way, I’ve seen these – I’ve had a chance to build two networks in my career. One was the Ariba Network, it has 3 trillion worth of commerce going through it on an annual basis, more than all the trade in the Western Hemisphere. And the other one, of course, is DocuSign, with 600 users around the world. And if you think about these principles and you think about the economic trust network, the – first of all, it creates visibility, right. And so you have, in essence, it’s looking like that that steering committee turn into board of governors, and then you bring in an advisory council, where we would have the developing nations as well as private sector companies, so they’re all getting behind it. A key is you don’t want to create too much friction out of the gate in terms of developing too much bureaucracy, and so that we would certify the projects. Now, what that means is that that’ll drive more private sector investment into some of these developing nations where we’re really trying to drive it to. So it’s actually creating a model, because everybody’s been talking about this for a long time, and a lot of these developing nations have had bad experiences when it is not from a trusted vendor or not high quality. So – and there’s different things we could do to kind of crank it up as well. Yeah.
MS ORTAGUS: Go ahead.
QUESTION: I want to ask about a recent decision regarding China. You guys – well, the U.S. has sanctioned COSCO, two subsidiaries of COSCO, last September. And then you guys recently lifted the sanctions on one of them. So the initial decision to sanction them caused a wave in the shipping market, and last Friday you lifted it. And then we had some guidance saying the lifting of these sanctions does not mean that our maximum pressure campaign is, like – we’re letting it off. Can you explain a little bit, like what those steps were? They are seemingly contradictory. Like, why was the decision to lift the sanctions came? Was that part of the trade talks or was China giving some assurances that we’re not going to lift any more Iranian oil?
UNDER SECRETARY KRACH: Yeah, I’m not familiar with the details. That is truly something we can get back with you on.
MS ORTAGUS: Send me a note, and I’ll —
MS ORTAGUS: We’ll get you an answer.
UNDER SECRETARY KRACH: Yeah, I mean, I’m aware of it.
MS ORTAGUS: If everybody’s interested, I’ll just —
QUESTION: Yeah, part of your (inaudible) deals with that. That’s fine.
UNDER SECRETARY KRACH: I know —
MS ORTAGUS: Don’t worry. I know it —
QUESTION: Can I ask you on Davos? So much of the forum this year was focused on climate change. President Trump, in his address, sort of dismissively talked about foolish fortune tellers and prophets of doom, and again was dismissive of climate change in general. What did you hear from folks that you met with, foreign counterparts? And does it seem like the President being so far out of step with the rest of the world on those issues is hurting U.S. standing?
UNDER SECRETARY KRACH: Yeah. That was – it’s almost like it’s taken out of context a little bit, and perhaps in maybe some of the publications it did. If you look at what he said and what his speech is, it was a very optimistic tone, and what he talked about was American ingenuity, global innovation, and these problems we can solve. And he was not dismissive about the environment. He talked about clean air, clean water. He announced the Trillion Trees initiative. So it was really positive. I think – when I talk to a lot of the CEOs or a lot of the country leaders afterwards, they’re like going, “Well, I guess he does believe in the environment.”
I remember as we were kind of walking from one meeting to another, they put a microphone – “Hey, do you believe in the environment?” He goes, “Absolutely.” So – and what we believe in is – and the President in particular – is results speak louder than words. And when I was in Norway, we announced – I announced a $1.2 billion commitment to the blue economy. So there’s a lot of initiatives that are going on. So they kind of contrasted him a little bit, and even we talked with Klaus Schwab, who is the CEO and the founder of it, and he kind of said that mischaracterized it and was a little unfair.
QUESTION: But did you see or did you hear from folks who wanted the U.S. – there’s sort of this push that it’s not just about market innovation and allowing capitalism to solve the problem, but that governments need to step in because it’s becoming more urgent and that we’ve got to get to the 1.5 Celsius degree difference sooner. Was there any push on you in your meetings that the U.S. should be doing more beyond just allowing market innovations to solve it?
UNDER SECRETARY KRACH: Yeah. You know what’s interesting is if you look at my remit, my official title, my mission is to optimize economic growth, energy security, and the health of the planet to maximize national security – I mean global economic security – and really advance prosperity around the world. So it’s a complex equation. Our energy abundance helps us incredibly with our economic security, but it doesn’t mean that we’re not doing everything we can to accelerate innovation in clean tech areas, and that’s an area where we have to remain the leader. So yeah, I think people – I think people really understand that.
One of the breakout sessions that I went to and I spoke at was the battery alliance initiative, which actually we’re going to probably incorporate in the economic trust network. It’s – and they actually have a set of 10 principles in terms of the critical minerals. And we announced an initiative – our energy resource initiative at UNGA that announced standards in terms of good governance and also taking care of the environment, because there’s some countries that will come into countries that are developing nations that have critical minerals, so they’ll just – it’s just scorched earth. So we’re really driving those kind of things.
MS ORTAGUS: Go ahead. Nike.
QUESTION: Yeah. If I may, what are your major takeaways from your conversation with the foreign counterparts in Davos regarding Huawei and China challenge? And please pardon me if you have already addressed some of the issues before in different location – but did you meet with Twitter or Facebook while in Silicon Valley? And was there any discussion on how to counter the disinformation campaign from Russia, China —
UNDER SECRETARY KRACH: Yeah.
QUESTION: — if there is any tangible agreement? Thanks.
UNDER SECRETARY KRACH: Yeah. So what was the first part of your question? The —
QUESTION: Your takeaway from conversation with the foreign counterparts in Davos regarding China challenge.
UNDER SECRETARY KRACH: Yeah, yeah. So all of them, all of them want and they say they need America to lead because the retaliation issue. You step out, the – and that is a fact and they want us to go out there and lead that charge. That’s number one. The second one is look, the EU can’t do it alone, Japan can’t do it alone, U.S. can’t do it alone. We need to have that network of alliances and we need the private sector. That for sure is a takeaway. That for sure is a takeaway out there in Silicon Valley. So – and then there’s what are the things that we can do proactively and then also what are the things that we can do to defend our technological and our financial assets.
And where we’re coming from is yeah, we just want – we want to just have a level playing field. And so those trade tenets of fair, free, and reciprocal, those tenets along with those trust principles – that’s how we want to do all economic collaboration, and that’s really what that network is all about. And that resonates with all those leaders.
And then in terms of the private sector and – well, let me see if I have your question right. In terms of disinformation, if you look at the China – the Great China Firewall, it’s a one-way street, so – and this is how – you gave perfect examples like a Facebook or something like that. All – they could grab all data coming in, but none of their data goes out, right? So they’re able to get more data. They – it’s a one-way, just suck it all in. Their propaganda is the reciprocal of that. All of it goes out, but none can come in. And so that – I mean, that is – that is why we want to insist on reciprocity for all areas of economic partnering. So when we talk about data security, privacy, data flows, reciprocity is an absolutely rock-solid principle, because there it’s a one-way. It’s a one-way data in, propaganda out, right?
MS ORTAGUS: Let’s do one more. Anybody? No? Okay. Thanks, guys.
UNDER SECRETARY KRACH: All right.
QUESTION: Thank you.
UNDER SECRETARY KRACH: Thanks, all, for your time. Thank you.