Jill O’Donnell: Welcome to Trade Matters, a podcast of the Clayton Yeutter Institute of International Trade and Finance at the University of Nebraska-Lincoln. I am Jill O'Donnell. Our guest today is Chuck Hagel. He served as a U.S. Senator from Nebraska from 1997 to 2009 and as the 24th U.S. Secretary of Defense from February, 2013 to February, 2015. Secretary Hagel, thanks so much for joining us today.

Chuck Hagel: Well, nice to be with you. I was, as you know, a great admirer and friend of Clayton Yeutter. So, what you're doing to carry on his legacy, I think, is very relevant to today and very important and he'd be very proud. I'm very proud because I consider you one of the Hagel family. When you worked for me in the Senate in Washington D.C. you did a terrific job and everybody so respected you. So, I'm grateful for that and very happy about you doing this because I think it uses all your talents and all your abilities. So, congratulations and keep doing it.

Jill O'Donnell: Well, thank you sir. Working in your office was really an important experience for honing these abilities. It was really the start to all this. So, thank you for your kind words. And I know you worked with Clayton Yeutter on various projects over the years. And I wanted to start just by asking you what you most remember about him in particular.

Chuck Hagel: Well, there's so many facets to Clayton Yeutter that everybody knows who knew him, worked with him. But I think I would start with his decency. This was a man of absolute bottom line decency and respect for others. He was a brilliant man, talented, incredible people skills, great abilities. He could talk about any subject. He could be a leader in any area. But I think the humanity of Clayton Yeutter is the thing that I will always remember the most, and I suspect most people too.

Jill O'Donnell: I've certainly heard that from others as well. Sir, switching over to now the events of the last year, year and a half, I'd like to ask you a really pointed question about the phrase trade war. You are someone who has been involved in an actual war. You're a decorated veteran of the Vietnam War. You've served on the Senate Foreign Relations Committee, which has to examine U.S. relationships around the globe and confirm senior diplomats. You've served as Secretary of Defense. You thought carefully about the well-being of military service members for many years. And I wonder, given your experiences, how the phrase trade war strikes you. Is that accurate? Is it a useful way to describe what's been happening over the last 12 to 18 months?

Chuck Hagel: Well, when I was in the Senate, I was the chairman of the Banking Committees’ Subcommittee on Trade and Security. And I was chairman of the Foreign Relations Committee on Trade and International Monetary Policy. And I got to know, and learn, and see a lot in those years because of those positions. And, even before that, I had started international companies that had taken me all over the world in telecommunications.

I'm not an expert on trade, but I know it firsthand from being a practitioner of it and being involved in policymaking. So, your question, I think it was a very good question. Because I don't think trade necessarily equates to war. And I think it is an unfortunate misnomer. I mean, trade is serious. And trade can be very debilitating to countries, people who are not wise in how they develop trade policy. But it's an exaggeration to say it's a war because trade is so connected to the well-being of every country, of their future, of their economics, of their security, of their foreign policy, of the future of their people. And I've been to a war and I've seen wars up close. And it's not the same. I mean, it's serious. I get it, but it's probably exaggerated to say trade war. And I think, also, that hurts, in trying to have the person on the street understand what differences are all about, when you say, well, we're in a trade war or you say trade wars are easy to win, well however way you define trade differences or a trade war, they're not easy to win. They always are very, very damaging to everybody involved.

Jill O'Donnell: They are. Sir, one set of the tariffs that we've seen enacted by the U.S. on some trading partners are results of the so-called section 232 law, the so called National Security Provision, which allows the U.S. to impose tariffs on trading partners if certain imports that are being examined are deemed to threaten to impair the national security of the U.S. So, that law emphasizes the relationship of the economic welfare of the nation to our national security. And I wonder again, given the vast experiences that you have in national security and foreign policy, how do you see the relationship between the economic health of the United States in particular and our national security?

Chuck Hagel: Well, I think for any nation, it's certainly this way with the United States, economic is the strength of your government, of your nation in many ways. I mean, we are a strong, strong nation because of many things. Start with the fact that we have a constitution that works, and that's living, and that we can use correct past injustices. That's why we have 27 amendments to the Constitution. That's fundamental to a country's future.

Second, we are a nation of laws. We abide by laws. We work from the foundation of laws. Critically important. Trade, and national security, and economic strength are all intertwined. If a nation does not have economic strength, they can't afford really strong national security or national defense because how do we think we buy planes, and ships, and have cyber capabilities, and we field armies and navies? Not because we're a weak economy, but because we're the strongest economy in the world and have been. So, the strength of your economy correlates directly to the strength of your country and the national security of a nation.

Jill O'Donnell: So, you referenced our U.S. Constitution there and I'd like to follow up on that for a moment. As you know very well, there have long been tensions between the congressional branch and the executive branch over war powers, over trade powers. And Congress has delegated a significant amount of authority to the executive branch on tariffs and trade, which they did starting in the 1930s. And you've served in both arenas, in the U.S. Senate, and then later as a cabinet officer as Secretary of Defense. You've seen some of those tensions play out from both vantage points. Do you think those kinds of tensions ever get resolved? Or is there anything useful about having them in place?

Chuck Hagel: Well, there, I suspect, is always going to be the conflict of push, pull between the authorities and rights and powers given to each branch in the Constitution in articles one and articles two of the Constitution. I mean, we are a government of three co-equal branches of government. And they are clearly stated, their responsibilities in articles one, two, and three of the Constitution. So, you've always had a dimension of a certain conflict between the executive and congressional over powers. And it ebbs and flows. And I don't think that changes. That tension though can be healthy. I think you can take it too far. I think in this administration they've taken it way, way too far. I think they've essentially discarded completely the authorities and powers of the Congress. And that's why a lot of this is ending up in the courts, whether it's border security or whether it's taking 3.6 billion dollars out of the Pentagon for appropriated projects to build housing and schools for our military. And a president deeming that 3.6 billion dollars for security on a border wall because it's a national emergency, that's a constitutional issue and that's in court right now. And it'll be decided, I suspect, by the Supreme Court. That's just one example of the push, pull of presidents and Congress fighting over authorities.

There have been 12 presidents, I believe, since World War II. Seven of those 12 have served in Congress. So, of the 7 of those 12 presidents, they have understood the congressional need to keep that congressional authority and power within the confines of the halls of Congress. And so, they becoming president with the background that they had in the Congress, understand both sides. But, when they're president, they see their job as chief executive as the first responsibility they have. You see it kind of, if you look at World War II and then last 70 years where we are today, you've seen kind of the ebb and flow of strong presidential powers versus the Congress delegating more and more power. I'll just give you two examples.

During Watergate and after Watergate, the Congress took back a lot of authorities and powers by passing different resolutions and so on to weaken the presidency because of Nixon, and Watergate, and all that had happened there. Roll forward to 9/11, 2001 when the Congress really abdicated its many responsibilities and giving the president incredible power and authority. For example, we passed in 2001 right after 9/11 the Authority for Use of Military Force, AUMF. And then, we passed another one in 2003 which gave the president really totally unlimited authority in Iraq. The Congress has not revisited the authorization of military force since those two votes were taken in 2001, 2003 because no president has wanted to have another vote or have constrictions put on their abilities to use military force. And they like the AUMF of 2001, 2003 because it gave them tremendous latitude. I think you need constantly to update and bring into focus the realities of present day versus the president's powers for military force. But those are just examples that you see of ebb and flow of the issue that you're talking about. And I think too, as I said, that tension is not all bad. I mean, that's why you have the courts, quite frankly. That's why you have article three in the Constitution. When there is a major, major difference in issue, the courts decide it. And that's worked pretty well for us the last 240 years. There are things I agree with, some things I disagree with. But, I mean, you've got to have that kind of structure that everybody respects and everybody adheres to, to make a democracy work.

Jill O'Donnell: Another trend, zooming out a little bit over the last 70 years, as you mentioned this timeframe of the past 70 years, another trend that I think we're seeing is a lot of discussion about the so-called decline of the liberal international order, the ideas and institutions, as you know, built and championed by the U.S. and Allies in the post-World War II era like the World Trade Organization, like the North Atlantic Treaty Organization, and others. We certainly live in a different world than the era in which these institutions were created where we have new issues to contend with like cybersecurity and new countries at the table now that have more economic clout than they used to, but different political traditions than the United States does. Do you think these institutions are adaptable to the world as it is now? There's so much talk about whether this order is dying, or it's already dead, or it's weakened, or maybe it needs to change. And I wonder what is your prognosis for this network of ideas and institutions that have served the world pretty well for 70 years but now are experiencing some stress due to longstanding challenges building over time, as well as more recent ones?

Chuck Hagel: Well, I think where I start is all institutions have to adjust and adapt to the new realities of the times. I mean, we're looking at the last 70 years. Well, I don't know of a 70 year period in the history of man that has changed so much in every way through technology, you name it, whatever discipline you want to talk about science, healthcare. Therefore, institutions have to adapt, have to change. They have to adjust or they become irrelevant. I'm a strong, strong supporter of the world liberal order that we led in constructing after World War II. It has essentially been responsible for not allowing a World War III. Every leader of the World War II generation went to their graves concerned about a nuclear exchange between the Soviet union and United States, a World War III. That hasn't happened. Doesn't mean it can't happen. It hasn't happened. No nuclear exchange.

You look at the tremendous advances in all disciplines in the world and everything, new freedoms, new opportunities, new possibilities. Yes, we've still got a lot of problems. Yes, we've had wars. We've had a lot of issues, and we still do, and we've got more coming. We've got two billion more people, according to demographers, going to be on the face of the earth in the next 25 years. So, I don't think the answer is to dismantle that world order, which has done more for more people than any world order in the history of mankind. Actually, they weren't world orders. But you got to remember, if you dismantled this liberal world order that we have made up of the institutions that we formed after World War II, United Nations and IMF, International Monetary Fund, World Bank, General Agreement on Tariffs and Trade, which is now the WTO, North Atlantic Treaty Organization, NATO, if you take those away, then what do you replace them with? Well, you're most likely not going to replace them with anything. So, what you now have is a world completely fractured, orbiting all these countries, these satellites on their own. That's when the world becomes dangerous, very dangerous, when it's every man, every woman for themselves, every country for themselves. Because we always have to remember, every country always responds in its own self-interest. That's not bad. That's not bad. That's predictable. But that self-interest is guided and tempered within these international organizations that are not perfect. That's why they need changing and adapting. But they're better than the alternative.

When you set free all these countries responding to no international law, to no international boundaries, that's when the world becomes dangerous. That's when you look at confrontations. And, because of technology today, you've got nine countries with nuclear capability. And some are very dangerous and irresponsible. Terrorism, cyber technology that now allows non-state actors to have great abilities in weaponry. So, I think we've got to be very careful because I think on this world order thing and what we're going through now, I think we could make some big, big mistakes that could lead to horrendous problems in the future. And we wouldn't even realize what we're doing. I understand the world today is volatile, uncertain, unpredictable, dangerous. Everywhere our western democracies are seeing surges of populism, nationalism. Brexit is a perfect example. The polarization and political divide in this country we've not seen since Watergate. And I was around at Watergate. I was chief of staff to a Nebraska Republican congressmen. This is far worse than Watergate. And the trade issues, the tariff problems, I mean we've got a lot of problems in the world, but we just have to stay steady and wise.

And just one more thing, America has been the centerpiece of this world order. It doesn't mean we dictate and we tell everybody what to do. We've made mistakes. But, when we stumble and when we're off balance, the world is off balance. The world looks to us for leadership. And they may agree, may disagree. But, if we forfeit that position and walk away from that responsibility of world leadership because it's too much of a burden, and I don't think it's too much of a burden, I think it's helped us as much as it's helped any country in the world, then something will replace it. There will be a vacuum. And like nature, it abhors a vacuum. It'll be China, which they can't do it. Or it'll just be satellites of countries floating around out there in the universe only focused on their own self-interests, which becomes more dangerous.

Jill O'Donnell: So, I wonder what your thoughts are about how you reinforce the idea of the importance of American leadership as well as the lack of an alternative to this liberal international order that we've had in place. And this reminds me of something you wrote in your 2008 book called America: Our Next Chapter. Where you made the connection between trade, and prosperity, and peace. And you wrote, "Nations that have vigorous trade relations are less likely to cause mischief abroad because the nations of the world trading community are shareholders in an enterprise that binds us all together, and we all have a stake in its success." And I know there are some people who feel that maybe they've lost out because of globalization or because of trade. Maybe they work in an import competing industry and have seen that go away. So, how do you talk about the overall gains from trade and the national security benefits of trade to those who don't feel at the personal or household level that they've benefited from these changes?

Chuck Hagel: Yes. And I understand that. I mean, you can go through manufacturing today in this country over the last few years that closed down. Coal mines every day are closing down. But that's the story of history and progress. You're not going to stop that. So, what you have to do, you have to adapt to that. You've got to change that. You've got to re-educate to that. You've got to find new opportunities for these people because the world is not going to stop in order to protect one industry in the United States, or the coal industry, or textile manufacturing, or whatever it is that's been run over by new technologies, cleaner things, better things. That's just the history of mankind. It's the history of the world. So, we have got to be smarter than we've been. It's educate our people for new opportunities, for new jobs. Explain it. The politicians have some responsibility here, not just play along politically, be courageous in explaining this to your constituents. Those coal mining jobs are not coming back. Those textile jobs are not coming back. Many of the jobs are just not coming back. And I didn't invent it or no one else did. That's the way it is. So, let's get smart. And let's get ahead of it. And let's do something better. That means give our people new training, new education, new opportunities.

I was asked once by someone years ago when I was on the Senate Foreign Relations Committee and, as you know, I did a lot of traveling all over the world. And somebody asked me once, well Senator, how do your constituents feel about you being such an active leader on the Senate Foreign Relations Committee as you are going all over the world and meeting these people? I mean, you're a small agriculture state in the middle of the country. You wouldn't think that your people would be that interested in foreign relations. And I said, the people of Nebraska, the people of the Midwest understood foreign relations, the reality of foreign relations long ago because they saw in foreign relations an opportunity for new markets. Corn, soybeans, cattle, beef, pork, sorghum, you can only sell so much of that here in Nebraska, or Iowa, or Kansas to your own people. You got to find new markets, new ways of prospering. That's what we've done. That's what this country has done better than anybody in the history of man. And these new opportunities over the years for American agriculture have been astounding. And it's not just agriculture, it's everything. So, that question gave me an opportunity to kind of, in my own way, in a simple way, just explain why trade and why economics are so connected into our foreign policy, our national security, our friends around the world. Because, when people trade, they get to know each other. There might even be some trust that would develop, exchange programs, student exchange programs. I mean, it seems to me that can only be good and only be beneficial for all countries. And especially because, if you're trading with one another, you're probably not going to war with one another. And that's good, I think. So, it all connects here into the same connecting tissue that is called trade. And it's just fundamental. I think it's one of the anchors of world affairs.

Jill O'Donnell: So, how did trade, and new export markets, and economics generally figure in to your work as Secretary of Defense? It's certainly not the purview in the first instance of the Department of Defense, of course. But how did that, in the larger context, figure in to how you approached your job and what you thought about daily?

Chuck Hagel: Well, as Secretary of Defense and every time I met with world leaders, I did all over the world all the time, the issue of our commercial interests, our trade interests, our economic interests were always top line parts of any conversation, or any agreements, or strategies that the United States has or had with allies and other countries. For example, sea lanes, sea lanes around the world, international high seas. Protection of those seas in everyone's interests. We've had an issue with China over the last few years. And I met with President Xi three times on this. What the Chinese are doing, building up those little rock islands in the South China sea and East China sea, claiming that so much of that is their territory. They're putting military bases on those islands. And the United States has had to make it very clear that we will not allow any inhibition of those sea lanes, those international sea lanes. They will be free. We will maintain the freedom of those sea lanes internationally all over the world with our allies. And we can't do it without our allies. That would be just one component of this. So, trade and economic interests were certainly one of the top issues that President Xi of China and I had to discuss. I don't think there is any dynamic of security policy that, like you said, resides with the defense department as our main responsibility that doesn't involve some economic interests of this country. Because, as I said earlier, our economic interests are directly related to our strengths and our security interests.

Jill O'Donnell: Sir, one more question for you today. And that is something that I ask every guest. And that is, what have you read lately about trade or global economics, a book or an article, for example, that's been most striking to you?

Chuck Hagel: Well, I read all the newspapers. I'm a dinosaur, Jill. I still read newspapers. But I read all the newspapers, and the Financial Times, and Wall Street Journal, and the newspapers that are mainly focused on trade. The New York Times does a pretty good job with it too. I read them all. But a book I'm actually re-reading, I've found more time to read books these days, it's a book that Dean Acheson wrote. Dean Acheson was Secretary of State in the last years after World War II under President Truman. And he was really the leader that had the responsibility of working with allies to frame and form all these international... what is referred to as Coalitions of Common Interests, this liberal world order. And it took about ten years to put all these organizations, institutions in place that we've already mentioned during this program. And it's a fascinating book as to how that was done. The name of the book is Present at the Creation, by Dean Acheson. And he wrote it after he left office as Secretary of State in the '50s. But it's fascinating because it talks about why these organizations were instituted.

For example, GATT, General Agreement on Tariffs and Trade. Unfortunately, this administration is not using it now. It's a WTO. The reason the General Agreement on Tariffs and Trade was set up was exactly to address issues between nations who thought that they were being unfairly treated, or tariffed, or whatever it was. To bring it to an international body to be the arbiter of fixing it. For example, the United States was just awarded, and your people know about this, you do, by the WTO, which was the successor of GATT. The European Union had been illegally subsidizing Airbus. And so, the United States then, according to WTO, gave the United States the right, international authority to tariff products from Europe. Now, that's the way to do this, not just arbitrarily, unilaterally say, well, I'm going to tariff 30 billion dollars, 100 billion dollars, whatever it is on Chinese products because I think they've been treating us unfairly because they're doing this one, two, three. But to go outside the boundaries of international law is not the way to do it. The way to do it is the way the United States has been doing it. We've won, by the way, we've won more of the cases in the WTO and GATT than we've ever lost when we've challenged people on not using fair trade practices. So, and I know that wasn't your question. But the Present at the Creation is a great book to remind us all how these organizations were built, why they were built, why they were so important, not just after World War II, to get the world economy back on its feet because the United States was the only economy left in the world after World War II, but for the future. And it was just brilliant how these men and women at the time, these leaders of the world, could build something as far reaching and as visionary, just like the founders of our Constitution.

Jill O'Donnell: By coincidence, I actually cracked open that very book this week. I found a used copy recently and I just started. But that is a great read. I think you're right. It's a really good reminder of the gravity of the situation these leaders were dealing with at that time. And exactly as you said, why these institutions were created and how visionary they really were. So, thank you for mentioning that.

Chuck Hagel: Sure. Well, I'm glad you're reading it.

Jill O'Donnell: Yes. And again, it's been a real pleasure to talk with you. Thank you so much for being on the Trade Matters podcast today.

Chuck Hagel: Well, it's my honor, Jill. And keep doing it. And very proud of what you guys are doing. I think what you're all doing there in that Institute is so important and relevant to the world today.

Jill O'Donnell: That's it for this episode of Trade Matters. A big thank you to Bryce Doeschot, Haley Apel, and Brianne Wolf for helping produce this podcast. Join us next time for a conversation with Bruce Hirsh, founder of Tailwind Global Strategies. He previously served as the U.S. trade representative, chief counsel for dispute settlement and as legal advisor to the U.S. mission the World Trade Organization.

Jill O'Donnell: Please subscribe to Trade Matters on iTunes, Stitcher, or wherever you get your podcasts. If you have ideas or topics you would like to hear about on Trade Matters, we'd love to hear from you. Send us an email at yeutterinstitute@unl.edu, or follow us on Twitter @YeutterUNL [corrected.] Opinions expressed on Trade Matters are solely those of the guests or hosts and not the Yeutter Institute's or the University of Nebraska-Lincoln.