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AMBASSADORISCHINGER:Thanks very much. I think now we can continue. It’s my great pleasure now toopen our second panel this morning. We have two longtime friends of the MunichSecurity Conference. Both of our panelists have been with the Munich SecurityConference when they served in the U.S. Senate for many years. So let mewelcome both Secretary John Kerry and Secretary Chuck Hagel, both now no longerin the Senate but both now for a year, for practically a year, Secretary ofState and Secretary of Defense. Welcome, Mr. Secretaries. (Applause.)

I think the way we want to usethese 45 minutes or so is that both Secretaries will offer introductorycomments; and if you have a question to ask, please put it on one of the slipsof paper and hand it to the staff, and then we’ll use whatever time we have tohave a discussion, a Q&A session, in just a few minutes.

John, would you like to start?Thank you.

SECRETARYKERRY:Well, thank you very much, Ambassador Ischinger. I’m very grateful for theopportunity to be here. (In German.) Nice to be with everybody. And I am – Iwant to remark that Ambassador Ischinger had the pleasure of going to therenowned Fletcher School at Tufts University, but it sounds to me like he losthis Boston accent. I don’t know what happened to him along the way. (Laughter.)

This is a very real and specialpleasure for Chuck and me to be here at this conference. We do know thisconference well. And as Walter said, we are not just friends from the Senatebut we’re friends from a common experience of a long period of time. So it’s apleasure for us now to be working together as partners with respect to thenational security issues that challenge all of us.

So the fact is also that bothChuck and I feel this Atlantic relationship very much in our bones. Both of ourfamilies emigrated to the United States from Europe, and both of our fatherssigned up to fight tyranny and totalitarianism in World War II. And we bothwatched the Berlin Wall go up as we grew up, and we grew up as Cold War kids.

So we come to these discussions –both of us – with part of our formative years planted in the post-ColdWar/post-World War period, and certainly deeply in the Cold War period. As akid who grew up in school doing drills to get under my desk in the event ofnuclear war, this is something that still conditions my thinking.

It was during that period of timethat I first encountered what I came to understand as one of the unmistakablesymbols of the enduring American-European partnership. I was a young kid whoserved – who was with my father in Berlin when he served as the legal advisorto the then High Commissioner to Germany, James Conant. And I spent a piece ofmy childhood getting on trains in Frankfurt and going through the dead of nightto arrive in Berlin and be greeted by the American military man, and movebetween a British sector, a French sector, an American sector, and a Russiansector. So I can remember cold signs warning you about where you were leaving,and I can remember guns rapping on the windows of my train when I dared to liftthe blinds and try to look out and see what was on the other side.

I’ll also never forget walkinginto a building – I used to ride my bicycle down to Kurfurstendamm when it wasstill rubble. We’re talking about the early 1950s, just to date myself. And youcould see a plaque on a building that said: “This was rebuilt with help fromthe Marshall Plan.” But the truth is today, as we gather in Munich in 2014,George Marshall’s courageous vision – resisting the calls of isolationism andinvesting in this partnership – requires all of us to think about more than justbuildings. That period of time saw the Marshall Plan lead America’s support forthe rebuilding of a continent. But it was more than just the rebuilding of acontinent; it was the rebuilding of an idea, it was the rebuilding of a visionthat was built on a set of principles, and it built alliances that were justunthinkable only a few years before that.

And I say all of this to try toput this meeting and the challenges that we face in a context. So long as I canremember, I have understood that the United States and Europe are strongestwhen we stand united together for peace and prosperity, when we stand in strongdefense of our common security, and when we stand up for freedom and for commonvalues. And everything I see in the world today tells me that this is a momentwhere it’s going to take more than words to fulfill this commitment. All of usneed to think harder and act more in order to meet this challenge.

With no disrespect whatsoever –in fact, only with the purest of admiration to the strategic and extraordinaryvision of Brent Scowcroft sitting over here, Henry Kissinger, Zbig Brzezinski,who I don’t see but I know is here somewhere. There he is. These are men whohelped to shape and guide us through the Cold War and the tense moments and thereal dangers that it presented. But the fact is that this generation ofconfluence of challenges that we’re confronting together are in many ways morecomplex and more vexing than those of the last century. The largely bipolarworld of the Cold War, East-West, was relatively straightforward compared tothe forces that have been released with the fall of the Berlin Wall, the riseof sectarianism, the rise of religious extremism, and the failure of governancein many places. In fact, we should none of us be surprised that it is thewisdom and vision of Henry Kissinger in his brilliant book Diplomacy – which,if you’ve read it, reread it; if you haven’t, read it for the first time – laysall of this out in his first chapter as he talks about the balance – the oldgame of balance of power and interests. And as he predicts that this is moreconvoluted because of the absence of a structure to really manage and cope withthis new order that we face. Those were his words.

So today we are witnessing youthpopulations, huge youth populations: 65 percent of a country under the age of30, under the age of 25 in some places; 50 percent under the age of 21; 40percent under the age of 18 – unemployed, disenfranchised, except for whatglobalization has brought them in their capacity to be able to reach out andsee what the rest of the world is doing even as they are denied the opportunityto do it too – an enormous, desperate yearning for education, for jobs, foropportunity. That’s what drove Tahrir Square, not the Muslim Brotherhood, notany religious extremism, but young kids with dreams. That’s what led that fruitvendor in Tunisia to self-immolate after he grew too tired of being slappedaround by a police officer, denied his opportunity just to sell his fruit wareswhere he wanted to.

We are facing threats ofterrorism and untamed growth in radical sectarianism and religious extremism,which increases the challenge of failed and failing governments and the vacuumsthat they leave behind. And all of this is agitated by a voracious globalizedappetite and competition for resources and markets that do not alwayssufficiently share the benefits of wealth and improved quality of life with allcitizens.

And this is all before you get tothe challenge of global food security, water availability, and global climatechange. These are the great tests of our time. Now, even as our economies inthe United States and Europe begin to emerge from the economic trials of thelast years, we are not immune to extremism or to the natural difficulties ofnurturing democracy, and particularly as we measure what is happening with thenumber of jihadists who are attracted by the magnet of the Assad regime toSyria, where from Europe and from America and from Australia and from GreatBritain and from many other places they now flock to learn the trade of terror,and then perhaps to return to their home shores.

The task of building a Europethat is whole and free and at peace is not complete. And in order to meettoday’s challenges both near and far, America needs a strong Europe, and Europeneeds a committed and engaged America. And that means turning inward is not anoption for any of us. When we lead together, others will join us. But when wedon’t, the simple fact is that few are prepared or willing to step up. That’sjust a fact. And leading, I say respectfully, does not mean meeting in Munichfor good discussions. It means committing resources even in a difficult time tomake certain that we are helping countries to fight back against the complex,vexing challenges of our day.

I’ll tell you, I was recently inKorea and reminded that 10 of the 15 countries that used to receive aid fromthe United States of America as recently as in the last 10 years are todaydonor countries. Think about that: 10 of the 15 and the others are on their wayto being donor countries. Now let me be fair. We need to have this debate inAmerica too right now. The small fraction of our budget that we invest in ourdiplomacy and in foreign assistance is a miniscule investment compared to thecost of the crises that we fail to avoid.

So as a transatlantic community,we cannot retreat and we must do more than just recover – all of us. What weneed in 2014 is a transatlantic renaissance, a new burst of energy and commitmentand investment in the three roots of our strength: our economic prosperity, ourshared security, and the common values that sustain us.

Now first, our shared prosperity:Who would have imagined at the first Munich conference in 1963 that $2.6billion in goods and services would flow between us every day? That didn’thappen by accident, nor did the 4 trillion that we invest in each other’seconomies every single year, or the more than 13 million jobs that we supportmutually because of it. The depth and breadth of our economic position andpartnership was a conscious choice of the men I described and other men andwomen during that period of time who had a vision, and they need to be aconscious reflection of our vision today.

Today, as our economies recover,we also have to do more to put this indispensable partnership to work, a sharedprosperity that benefits us all. And we can start, frankly, by harnessing theenergy and the talents of our people, which is what the Transatlantic Trade andInvestment Partnership is all about. T-TIP is about more than growing oureconomies. It will promote trade, investment, innovation. It will bring oureconomies closer together while maintaining high standards in order to ensurethat we create good jobs for these young people who are screaming about thefuture. And it will cement our way of doing business as the world’s goldstandard. Imagine what happens when you take the world’s largest market and theworld’s largest single economy and you marry them together with the principlesand the values that come with it. It will – if we’re ambitious enough, T-TIPwill do for our shared prosperity what NATO has done for our shared security,recognizing that our security has always been built on the notion of our sharedprosperity.

We are the most innovativeeconomies in the world, the United States and Europe, and as such we have amajor responsibility to deal with this growing potential catastrophe of climatechange. I urge you, read the latest IPCC report. It’s really chilling. Andwhat’s chilling is not rhetoric; it’s the scientific facts, scientific facts.And our history is filled with struggles through the Age of Reason and theRenaissance and the Enlightenment for all of us to earn some respect forscience. The fact is that there is no doubt about the real day-to-day impact ofthe human contribution to the change in climate.

Next year, the United States willassume responsibility for the Arctic Council, and I can tell you just lookingat what’s happening in the Arctic – and there are others here who are deeplyinvested in that – we have enormous challenges. None of them are unsolvable.That’s the agony of this moment for all of us. There are answers to all ofthese things, but there seems to be an absence of will, an absence ofcollective leadership that’s ready to come together and tell our people notwhat they’re necessarily telling us through this crazy social media, incredibleconfluence of information that they’re sort of told they’re interested in, butfor us as leaders to suggest to them this is what you ought to be interested inbecause it actually affects your life and your livelihood and your future.

President Obama is implementingan ambitious plan that sees climate change not only as a challenge, but as anincredible set of opportunities for all of us, and I believe that. Themarketplace that created the great wealth in our country in the 1990s which sawevery single quintile of our income earners see their income go up, everyquintile saw their income go up, and we created the greatest wealth the worldhas seen during the 1990s, greater even in America than the period of thePierponts and the Morgans and the Rockefellers, Carnegies, Mellons, muchgreater. You know what it was? It was a $1 trillion market with 1 billionusers. It was the high-tech market, the personal computer mostly,communications.

The energy market that we arestaring at – that is the solution to the climate change. Energy policy is thesolution to climate change. That market, my friends, is a $6 trillion markettoday with 4 to 5 billion users today, and it will grow to some 9 billion usersover the course of the next 20 to 30 years. It is the mother of all markets,and only a few visionaries are doing what is necessary to reach out and touch itand grab it and command its future.

I spoke last week at Davos aboutthe diplomatic work that the United States is engaged in, that I am engaged in,at the direction of President Obama, who believes in this vision and in all ofthese issues, and our European partners are jointly with us undertaking onthree of the most important initiatives right now to make the Middle East andthe world more secure.

With the help of countries likeGermany, the U.K., Italy, Denmark, Norway, Russia, we reached an agreement,ratified by the United Nations, to remove chemical weapons from Syria.Obviously, I’m sure there’ll be some questions about that, and there ought tobe, but together, we need to all keep the pressure on the Assad regime to stopmaking excuses and fulfill Syria’s promises and obligations and meet the UNdeadlines.

With the help of the EU, Germany,U.K., France, and Russia – as well as China – Iran agreed to freeze and rollback its nuclear weapons program for the first time in a decade. And in thecoming months, we will remain unified – or I hope we will – to guarantee Iran’swillingness to reach a comprehensive agreement that resolves the world’sconcerns about its nuclear program, hopefully through diplomacy backed up bythe potential of force.

With the help of the EU and theQuartet, we are pursuing a long-sought and much-needed peace between Israelisand Palestinians. I have to tell you, the alternatives to successfullyconcluding the conflict, when you stop and list them, are or ought to be unacceptableto anybody. If you look at it hard, you ought to come out and say failure isnot an option, though regrettably the dynamics always present the possibility.

And so together we need to helpthe parties break through the skepticism, which is half the challenge, andbegin to believe in the possibilities that are within their grasp. As PresidentObama said on Tuesday, “In a world of complex threats, our security andleadership depend on all the elements of our power – including strong andprincipled diplomacy.” And it depends on harnessing the power of our strongestalliances, too. No one country can possibly hope to solve any of the challengesthat I have listed on its own.

That’s why this kind of meetingand the alliance that it represents, more importantly, and the work that we doout of here after these meetings – that’s why it’s so important that the UnitedStates and Europe stick together, that we continue to understand the importanceof the strength of our unity and unity in action, whether we’re working onAfghanistan, the Central African Republic, the challenge of the Maghreb, theLevant, the DPRK, global challenges like cyber security, infectious disease, orthe pursuit of a world without nuclear weapons. Plain and simply, our sharedprosperity and security are absolutely indivisible. And in a shrinking worldwhere our fundamental interests are inseparable, a transatlantic renaissancerequires that we defend our democratic values and freedoms. Don’t for aninstant underestimate how important that it is or that the difference that itmakes to courageous people like those in the Ukraine, in Ukraine who arestanding up today for their ability to have a choice about their future.

As I say all of this, the UnitedStates is the first to admit that our democracy too has always been a work inprogress. We know that. We’re proud that we work at it openly, transparently,accountably to reform it, to fix it, and to strengthen it when needed.President Obama’s review and revision of our signals intelligence practices isa case in point. So I assure you we come to this conversation with humility.But humility is not a reason to avoid calling it the way you see it. And thefact is that we see a disturbing trend in too many parts of Central and EasternEurope and the Balkans. The aspirations of citizens are once again beingtrampled beneath corrupt, oligarchic interests, interests that use money tostifle political opposition and dissent, to buy politicians and media outlets,and to weaken judicial independence and the rights of nongovernmentalorganizations.

Nowhere is the fight for ademocratic European future more important today than in Ukraine. While thereare unsavory elements in the streets in any chaotic situation, the vastmajority of Ukrainians want to live freely in a safe and a prosperous country,and they are fighting for the right to associate with partners who will helpthem realize their aspirations. And they have decided that that means theirfutures do not have to lie with one country alone, and certainly not coerced.The United States and EU stand with the people of Ukraine in that fight. Russiaand other countries should not view the European integration of their neighborsas a zero-sum game. In fact, the lessons of the last half century are that wecan accomplish much more when the United States, Russia, and Europe worktogether. But make no mistake, we will continue to speak out when our valuesand our interests are undercut by any country in the region. President Obamaleaves no doubt about America’s commitment to this relationship, and he willcome to Europe three times already scheduled this year to reinforce theinvestment in our shared future.

For more than 70 years – thisyear we will celebrate the 70th anniversary of D-Day – the United States andEurope have fought side by side for freedom, and that is what binds us. Thoseties have grown stronger in the 25 years since the fall of the Berlin Wall, inthe 15 years since our post-Cold War NATO enlargements began, in the 10 yearssince the EU began expanding again. It is important to understand this is morethan just a measure of years; it is a measure of the most productivepartnership in the history of international affairs, nothing less.

Our challenge today is to ensureopportunity, security, and liberty for Americans and Europeans, but also forpeople all over the world who look to us for that possibility. Our challenge isto renew this partnership and to live up to the legacy of the world’s strongestalliance. The 21st century will demand these commitments from all of us, and Ibelieve we have to rise to this occasion as Americans and Europeans alwayshave, and that’s the only thing that will give meaning to this kind of ameeting and meaning to the legacy that we need to honor in our generation.Thank you. (Applause.)

My pleasure to introduce to youmy friend from the Senate. We are both in different parties, but believe me, weshare a vision and we are really enjoying working together these days. ChuckHagel, the Secretary of Defense. (Applause.)

SECRETARYHAGEL:John, thank you. Thank you very much, and to Ambassador Ischinger, thank youfor once again hosting this conference, an important conference. It’s good tobe back in Munich. As you noted, I have been here many times, and I especiallyappreciate being here with my friend and former colleague and now cabinetpartner John Kerry.

I want to also recognize ourUnited States congressional delegation, which I have been part of a number oftimes, led by an unfamiliar face here, John McCain. John, I see you. Thank you.Sheldon Whitehouse, Senator, thank you for your leadership. And many of thedelegation are individuals who have led on this issue for many years, and youare all quite familiar with most of the U.S. congressional delegation. So thankyou for your continued leadership and involvement.

I also want to recognize ourAmerican Ambassador to Germany John Emerson, who is here somewhere, for hiswork and his efforts. And it is not easy, as we all know, for an ambassador inany country at any time, but Ambassador Emerson has done a tremendous job andwe very much appreciate his good work and his leadership as well. (Applause.)

In preparing for these remarks, Iwas looking through the memoirs of Henry Stimson, who over a long and distinguishedcareer held both my job – actually, he held my job when it was Secretary ofWar, and he held it twice. He also held John Kerry’s job, Secretary of State.The book I thumbed through contained a handwritten letter from McGeorge Bundy.Many of you know – knew McGeorge Bundy, worked with McGeorge Bundy, andcertainly, everyone knows who he was. He helped in this particular case HenryStimson write his memoirs, and that book was published in 1952.

In Bundy’s letter to an admirer,Bundy described Stimson’s recollections of life as a picture of history worthgoing on with, whatever the ups and downs. I recall these words here in Munichthis morning because this conference is itself a picture of history, thehistory of the transatlantic partnership. And that history is very much worthgoing on with. That’s why we’re celebrating this gathering’s 50th anniversary.

The transatlantic partnership hasbeen successful because of the judicious use of diplomacy and defense. Over thelast year, John and I have both worked to restore balance, balance to therelationship between American defense and diplomacy. With the United Statesmoving off a 13-year war footing, it’s clear to us, it’s very clear toPresident Obama that our future requires a renewed and enhanced era ofpartnership with our friends and allies, especially here in Europe.

As this panel acknowledges, weneed what John just described and as Ambassador Ischinger has noted, atransatlantic renaissance. The foundation of our collective securityrelationship with Europe has always been cooperation against common threats.Throughout most of the 20th century, these common threats were concentrated inand around Europe, but today the most persistent and pressing securitychallenges to Europe and the United States are global. They emanate frompolitical instability and violent extremism in the Middle East and NorthAfrica, dangerous non-state actors, rogue nations such as North Korea, cyberwarfare, demographic changes, economic disparity, poverty, and hunger.

And as we confront these threats,nations such as China and Russia are rapidly modernizing their militaries andglobal defense industries, challenging our technological edge in defensepartnerships around the world. The world will continue to grow more complicated,interconnected, and in many cases more combustible. The challenges and choicesbefore us will demand leadership that reaches into the future without stumblingover the present. Meeting this challenge of change will not be easy, but wemust do so and we must do so together. As our strategy in defense investmentswill make clear, the U.S. sees Europe as its indispensable partner inaddressing these threats and challenges, as well as addressing newopportunities.

The centerpiece of ourtransatlantic defense partnership will continue to be NATO, the militaryalliance that has been called the greatest peace movement in history. InAfghanistan, NATO-led forces are doing extraordinary work to help the Afghanpeople by strengthening the Afghan army and police so that they can assumeresponsibility for their nation’s security. European nations have maintainedremarkable cohesion and commitment in the face of sacrifice, uncertainty, andchallenges in Afghanistan.

As we bring our combat mission toa conclusion after 13 years, we should all be very proud of what our alliancehas accomplished. Members of the International Security Assistance Force,especially smaller nations, have greatly benefited from the experience oftraining and working alongside other partners in Afghanistan. We must continueto hone the capabilities we’ve fielded and sustain these deep and effectivedefense relationships. And NATO must continue to develop innovative ways tomaintain alliance readiness as we apply our hard-earned skills to new securitychallenges.

In reviewing U.S. defensepriorities tempered by our fiscal realities, it’s clear that our military mustplace an even greater strategic emphasis on working with our allies andpartners around the world. That will be a key theme of the Department ofDefense’s upcoming Quadrennial Defense Review which will articulate our defensestrategy in a changing security and fiscal environment.

The United States will engageEuropean allies to collaborate more closely, especially in helping build thecapabilities of other global partners. We’re developing strategies to addressglobal threats as we build more joint capacity – joint capacity with Europeanmilitaries. In the face of budget constraints here on this continent as well asin the United States, we must all invest more strategically to protect militarycapability and readiness.

The question is not just how muchwe spend, but how we spend together. It’s not just burdens we share, butopportunities as well. The Department of Defense will work closely with ourallies’ different and individual strengths and capabilities, from the trainingof indigenous forces to more advanced combat missions. We’re looking atpromising new initiatives, including Germany’s framework nations concept, whichcould help NATO plan and invest more efficiently and more effectively.

In Africa, the U.S. military andour European allies are already partners in combating violent extremism andworking alongside our diplomats to avert humanitarian catastrophes. In Mali, inthe Central African Republic, the U.S. and European partners are providingspecialized enablers such as air transport and refueling. We’re there tosupport a leading operational role for French forces. The U.S. has supportedFrance’s leadership and efforts. And we also welcome the German DefenseMinister von der Leyen’s recent proposal to increase German participation inboth countries.

All of us must work closelytogether with African nations in helping them build their security forces andinstitutions. A more collaborative approach to global security challenges willrequire more defense establishments to cooperate not just on the operationallevel, but on the strategic level as well. We are working with two allies – theU.S., UK, and Australia, building the three of us closer collaboration betweenour militaries across a broad range of areas from force development to forceposture.

For example, the United States ishelping the UK regenerate its aircraft carrier capability, which will enablemore integrated operation of our advanced F-35 fighters and more broadlyenhance our shared ability to project power. And last year, an Australian armyofficer became the deputy commanding general of U.S. Army forces in thePacific. This is helping connect our forces more strategically with our alliesand partners in the regions.

We believe this collaborationoffers a model – a model for closer integration with other allies and partners,including NATO as a whole, and it’ll influence U.S. strategic planning andfuture investments. Sustaining and enhancing these cooperative efforts willrequire shared commitment and shared investment on both sides of the Atlantic.That includes United States commitments to a strong military posture in Europe.

Since the end of the Cold War,the United States has continuously adjusted its defense posture to newstrategic realities around the world. As our force structure draws downfollowing the end of our longest war, there will be, there must be, adjustmentsin our posture to meet new challenges. For example, to respond to elevatedthreats to our diplomatic facilities in North Africa and the Middle East, wehave partnered with Spain to position U.S. Marines in Moron, and we have putother forces throughout the region on heightened alert status. These forces notonly enable us to respond to crises or support ongoing operations, but theyalso expand our diplomatic options amid the recent violence in South Sudan. Therapid availability of nearby forces allowed American diplomats to remain on theground and help broker a ceasefire.

An important posture enhancementis European missile defense in response to ballistic missile threats from Iran.Over the last two days, I’ve been in Poland, where I reaffirmed the UnitedStates commitment to deploying missile defense architecture there. As you allknow, that’s part of Phase 3 of our European Phased Adaptive Approach.Yesterday afternoon, the USS Donald Cook departed the United States for Rota,Spain, where over the next two years she will be joined by three additionalmissile defense-capable destroyers.

Despite fiscal constraints, thebudget that we will release next month fully protects our investment inEuropean missile defense. Our commitment to Europe is unwavering. Our valuesand our interests remain aligned. Both principle and pragmatism secure ourtransatlantic bonds.

In 1947, a time of widespreaddoubt about the continued value of the transatlantic partnership, Henry Stimsonargued that America could, in his words, no sooner stand apart from Europe thandesert every principle by which we claim to live. He helped persuade Americansthat, in his words, our policy toward the world – in that policy, “There is noplace for grudging or limited participation… Foreign affairs are now our mostintimate domestic concern.” Americans know well the wisdom in Stimson’swarning. We also know well the responsibilities we shoulder in partnership withall of you.

As President Obama told theAmerican people in his State of the Union Address this week, our alliance withEurope remains the strongest the world has ever known. I have every confidencethat our successors will be there 50 years hence to again celebrate the mostsuccessful and effective collective security alliance in history. But as we allknow, it will require continued strong and visionary leadership, attention,resources, and strong commitment.

In 2064, there will still be aWehrkunde, and there will still be a strong and enduring transatlanticalliance. Thank you. (Applause.)

AMBASSADOR ISCHINGER: Thank youvery much, Mr. Secretary. We have not a lot of time, so we’ll call on a fewquestions. I have a huge number of cards, and I apologize – I have to apologizeto most of those who have written down their questions. We can literally taketwo or three or maximum of four depending on the length of the answers.

Let me start with a question ofmy own, which I’d like to address – (laughter) – to Secretary Kerry. We had thevery interesting panel discussion yesterday between Tzipi Livni and SaebErekat, who were both sitting right here in the first row with Martin Indyk, onthe situation as where we are right now. How optimistic are you that you canactually nail this down? Question one.

And if I may add one to you, Mr.Secretary of Defense, a couple years ago, one of your predecessors, Bob Gates,gave a pretty strong valedictorian speech admonishing us, European allies, todo more, because if we didn’t do more, we would be not as useful as your alliesas we should be. Now, are you today as unhappy as Bob Gates was with us?

Maybe we start with the Secretaryof State.

SECRETARY KERRY: Well, Mr.Ambassador, I am willing to take risks, but I’m not willing to hang myselfhere. (Laughter.) So I’m not going to tell you how optimistic I am. I’m goingto tell you that I’m hopeful. I believe in the possibility or I wouldn’t pursuethis. President Obama believes in the possibility. I don’t think we’re beingquixotic and un – I’m a little surprised by some of the articles that tend towrite about an obsession or a fanatical effort to try to achieve this, etcetera. We’re just working hard. We’re working hard because the consequences offailure are unacceptable.

I mean, I want you all to thinkabout it. Ask yourselves a simple question: What happens if we can’t find a wayforward? Is Fatah going to be stronger? Will Abu Mazen be strengthened? Willthis man who has been committed to a peaceful process for these last years beable to hold on if it fails? What is the argument for holding on? Are we goingto then see militancy? Will we then see violence? Will we then seetransformation? What comes afterwards? Nobody can answer that question with anykind of comfort.

By the same token, for ourfriends, I see good Minister Tzipi Livni here, who has been absolutelyspectacular in this process, committed to it. Prime Minister Netanyahu hastaken very tough decisions to move this down the road, very tough decisions, ashas President Abbas, who had the right to go to the United Nations and hasforesworn it in an effort to try to keep at the table and keep the processmoving.

For Israel, the stakes are alsoenormously high. Do they want a failure that then begs whatever may come in theform of a response from disappointed Palestinians and the Arab community? Whathappens to the Arab Peace Initiative if this fails? Does it disappear? Whathappens for Israel’s capacity to be the Israel it is today – a democratic statewith the particular special Jewish character that is a central part of thenarrative and of the future? What happens to that when you have a bi-nationalstructure and people demanding rights on different terms?

So I think if you – and I’m onlyjust scratching the surface in talking about the possibilities, and I’velearned not to go too deep in them because it gets misinterpreted that I’msomehow suggesting, “Do this or else,” or something. I’m not. We all have apowerful, powerful interest in resolving this conflict. Everywhere I go in theworld, wherever I go – I promise you, no exaggeration, the Far East, Africa,Latin America – one of the first questions out of the mouths of a foreignminister or a prime minister or a president is, “Can’t you guys do something tohelp bring an end to this conflict between Palestinians and Israelis?”Indonesia – people care about it because it’s become either in some places anexcuse or in other places an organizing principle for efforts that can be verytroubling in certain places. I believe that – and you see for Israel there’s anincreasing de-legitimization campaign that has been building up. People arevery sensitive to it. There are talk of boycotts and other kinds of things. Arewe all going to be better with all of that?

So I am not going to sit here andgive you a measure of optimism, but I will give you a full measure of commitment.President Obama and I and our Administration are as committed to this asanything we’re engaged in because we think it can be a game-changer for theregion. And as Foreign Minister Abdullah bin Zayed said – he’s here somewhere –to a Paris meeting of the Arab League the other day, spontaneously he said,“You know, if peace is made, Israel will do more business with the Gulf statesand the Middle East than it does with Europe today.”

This is the difference of 6percent GDP per year to Israel, not to mention that today’s status quoabsolutely, to a certainty, I promise you 100 percent, cannot be maintained.It’s not sustainable. It’s illusionary. There’s a momentary prosperity, there’sa momentary peace. Last year, not one Israeli was killed by a Palestinian fromthe West Bank. This year, unfortunately, there’s been an uptick in someviolence. But the fact is the status quo will change if there is failure. Soeverybody has a stake in trying to find the pathway to success.

The final comment I would say, Mr.Ambassador, is after all of these years, after Wye, after Madrid, after Oslo,after Taba, after Camp David, after everything that has gone on, I doubtthere’s anyone sitting here who doesn’t actually know pretty much what a finalstatus agreement actually looks like. The question is: How do you get there?That’s political courage, political strength, and that’s what we have to try tosummon in the next days. And I’ll just tell you I am hopeful and we will keepworking at it. And we have great partners of good faith to work with, and I’mappreciative for that.

AMBASSADOR ISCHINGER: Thank youvery much. Thank you. (Applause.)

SECRETARY HAGEL: Ambassador,thank you. Let me just add a couple of sentences to what Secretary Kerry said.First, I enthusiastically support what Secretary Kerry is doing. We all knowthere is risk in everything. There is risk in status quo. The risk is alwaysthere in anything in complicated areas of the world. But I believe there is farmore risk in letting this slide.

I noted in my comments that – notin the context of this particular issue but overall on security issues, it’sgoing to continue to take – as the world is very instructive on this point andthe history has been particularly instructive – committed leadership and visionto address any big challenge. And as much risk and uncertainty that is in thisone, I do strongly applaud and support what John’s doing here. It’s clearly ineveryone’s interest.

As to your question, SecretaryGates may have said it a little differently than I did, but essentially, I saidthe same thing as Secretary Gates did. This is a partnership. Partnerships meanpartnership. Everybody has to participate. Everyone has to contribute.Everybody has a role to play. Because not only is something new today withrestrained resources in everyone’s budgets. I get that, the realities of whatwe’re each dealing with in our own respective countries, own respectivepolitical dynamics and dimensions – but if your nation’s security is not worthan investment, is not worth leadership in fighting for that investment, thenyou’ve got the wrong leadership or – again, history’s been instructive on thispoint – then the future of that country is in some peril. It’s going to takesome courage and vision and strong leadership to make this point clear to allof our constituents. And the Europeans must play their role as well. Thank you.

AMBASSADOR ISCHINGER: Thank youvery much. Among the many questions that were handed to me, there are two thatare almost identical, and I’m going to take these two together.

The first one is from Lord Powellfrom the UK, and they’re both on the T-TIP. Now, they’re both addressed to bothof you as former senators, and I read the first question from Charles Powell:“T-TIP is indeed vital, as Secretary Kerry says. Is it achievable now that theSenate majority leader intends to deny the President fast-track trade promotionauthority?”

And the other question is from anAmerican, Charles Kupchan from Georgetown University. Professor Kupchan raisesthe following question: “T-TIP is ‘the next big thing’ for the Atlanticrelationship. As former senators, please discuss the prospects forcongressional support, especially in light of Senator Reid’s recent comments.”

This is exactly the samequestion. I don't know which one of you wants to take that one.

SECRETARY KERRY: Well, I don’t –look, I respect Harry Reid. I’ve worked with him for a long time, obviously.Our colleagues are here – Lindsey Graham and John McCain and former Senator JoeLieberman. And I think all of us have learned to interpret a comment on one dayin the United States Senate as not necessarily what might be the situation in amatter of months or in some period of time.

Let’s get T-TIP done, put it inits context, then we wage the fight. And I’m not at all convinced that whatwe’ve heard is going to – I just think that there’s a lot of room here still,so I wouldn’t let it deter us one iota, not one iota. I’ve heard plenty ofstatements in the Senate on one day that are categorical, and we’ve wound upfinding accommodation and a way to find our way forward. So this should not bea deterrent, and I hope nobody will let it stand in the way.

On the merits, this is a majorinitiative for us, for Europe, for the relationship, for the world. And whenyou combine it with the TPP, it really has a capacity to achieve what the WTOhas not been able to succeed in, and it could have a profound impact onjumpstarting the economies for all of us. It’s worth millions of jobs, and inthe end, jobs are a very powerful political persuasion.

SECRETARY HAGEL: This TPP isclearly in the self-interest of both sides of the Atlantic, clearly. And Iwould suspect that our senators here this morning would have a better sense ofthis than two former senators, but this is a good example of what I wasreferring to in my remarks about let’s be smart and let’s be wise and let’s becollaborative and use all of the opportunities and mechanisms that we have toenhance each other – culturally, trade, commerce, exchanges.

We all know that a secureeconomic base – a dynamic, strong economy – is the anchor of any nation’sfreedom. Without the money, without the resources, your options become verylimited very quickly. So I would hope that this would get done by the UnitedStates Senate. It’s clearly in everyone’s interest. Thank you.

AMBASSADORISCHINGER: Thankyou very much. I have one concluding question because we have already run outof time for a while. This is from Jo Joffe, whom both of you know. His questionis the following, and I read it: “The U.S. keeps going through cycles ofwithdrawal. Is this another one? And if so, who is going to mind the store?”

A question addressed, again, toboth of you.

SECRETARYKERRY:Well, I think – look, I think everything I said in my comments make it clear –and I said it at Davos – we’re not withdrawing from anything, folks, exceptwe’re drawing down our troops in Afghanistan because that’s an agreed-uponapproach with ISAF, some 50 nations, and because it is time for the fulltransition to the Afghan Armed Forces and the Afghan people. So that’s aplanned process, but it is also contemplating maintaining a presence for thepurpose of continuing to train, equip, and advise the Afghan Armed Forces andto maintain a platform to do counterterrorism. So we’re hardly withdrawing;we’re transitioning.

Even as we do that, right now wehave just finished helping to conclude a ceasefire in the Sudan. I spent mostof the Christmas break on the phone with President Kiir, former Vice PresidentRiek Machar, with the foreign minister and prime minister of Ethiopia, thepresident of Uganda. That’s not disengagement. In the Great Lakes, we have aspecial envoy who has just succeeded in working with Mary Robinson of the UNand with President Kabila and Paul Kagame. And we have succeeded in disarmingthe M23, creating a structure by which we will now be able to begin doingdevelopment and helping those nations to stabilize.

We’re working in the CentralAfrican Republic and we’re working to help the French in Mali. We are deeplyengaged in Iran negotiations for some two years. We have been working – I beganthat work as a United States senator to begin to open up that opportunity of adialogue. We have an interim first-step agreement – not an interim agreement –a first step to lead to final conclusion. We are working with Geneva II, withRussia. That came from diplomacy and cooperation. And we are trying to pressfor transition. I think we need to do more. John McCain, Senator Graham and Iare talking. There are powerful feelings for why we believe Assad needs to feeleven more sense of urgency to come to the table. We’re deeply involved there.

We’re deeply involved in theMiddle East peace process. We’re involved with the Emirates, with the Saudi Arabians,and others working with respect to Egypt and Egypt’s transition. We’rerebalancing with Asia. We’re working on North Korea. I will be in China in twoweeks working on the North Korean issue, working with Korea, Japan,reunification – you name the issue – South China Sea.

I can’t think of a place in theworld that we are retreating, not one. And I believe we are engaged in aprofoundly proactive and visionary way to try to give life to this partnershipin ways that make a difference. We’re working in Libya. We’re working togetherwith our friends from Italy, Great Britain, and France to stabilize and workwith President – with Prime Minister Zaydan to build a legitimate securityforce. We’re deeply engaged in that training and otherwise.

So as I think – I mean, thereisn’t a part of the world that I can think of. We’re working on Cyprus quietly.You’re not hearing about it. We’re working on Nagorno-Karabakh, the Caucasus.We have an extraordinary amount of diplomatic reach at this particular moment,including in Latin America. And most recently, I just concluded a summit withthe foreign minister of Mexico and the foreign minister of Canada leading up toa summit between the president and the prime minister which will further cementthe North American hemispheric interests and our work on the TPP and the T-TIP.

So I think this narrative, whichhas, frankly, been pushed by some people who have an interest in trying tosuggest that the United States is somehow on a different track, I would tellyou it is flat wrong and it is belied by every single fact of what we are doingeverywhere in the world.

SECRETARY HAGEL: I would justadd, Ambassador – (applause) – that we have just heard the Secretary of Stateof the United States inventory some of the things we’re doing, some of theplaces we’ve been. I have never seen a full inventory of exactly what we’redoing everywhere, but I would venture to say the United States is more presentdoing more things in more places today than maybe ever before. How we’re doingit is differently, and it’s what I talked about, what John talked about –capacity-building for our partners, working closer with our partners, beingable to do more as we are more creative with these initiatives.

So we’re not going anywhere, andI would just add this as I end my comment. I’ve been Secretary of Defensealmost a year. I have had three major trips to the Asia Pacific. I have hadcountless trips to Europe. I’ve had a number of trips to the Middle East,Afghanistan. He’s the traveler. I’m not. But when you have a Secretary ofDefense dealing with the things that we’re dealing with in the Pentagon, withbudget restraints and force posture reductions and so on, and still we in DODare doing the kinds of things we’re doing with our combatant commanders toassist our diplomatic effort, which I talked about, we’re doing a lot of thingsall over the world. And if that narrative is not getting out there, then maybethat’s our fault, but I hope no one will leave here with any kind ofmisunderstanding that somehow we’re withdrawing from the world or we’re doinglimited work. It’s just the opposite.

SECRETARYKERRY: Mr.Ambassador, can I just add to that important areas? We just concluded asecurity – a High-Level Strategic Dialogue with Pakistan. And I’ve justconcluded, as you know, some two months ago a negotiation with President Karzaifor a bilateral security agreement, which we are waiting for a signature for.But we continue our anti-terror initiatives not just there, but in Yemen, inmany other parts of the world, and particularly now, we are focusing in onSyria where there are increasing numbers of extremists. And so I think you’llbe hearing and seeing more of this over the course of the next weeks andmonths. But I think Chuck may be right; I think we need to be more assertiveabout what we are doing.

AMBASSADORISCHINGER:Thank you very much. Thank you also, both of you, for deciding to show up herejointly together. I can’t think of a better demonstration of the commitment ofthe Obama Administration to keep the transatlantic link, keep the transatlanticrelationship strong and alive. So thank you for that strong message here today.Let’s give these two gentlemen a hand. Thank you very much. (Applause.)

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