Remarks by Secretary Gates at the Wall Street Journal CEO Council 2010 Meeting

U.S. Department of Defense
Office of the Assistant Secretary of Defense (Public Affairs)

These remarks were given at the Four Seasons Hotel, Washington D.C.                  MR. GERALD SEIB (Wall Street Journal Executive Washington Editor):  I'm just going to note, for those of you don't realize it, Bob Gates' career in the U.S. government started in 1966, when he was a young intelligence officer.  He's now worked in the U.S. government for 30 years, in the White House and Pentagon for six different presidents, surely deserves some sort of award for that.  (Laughter.)  But I mention it mostly because he's announced -- eight presidents, six in the White House and Pentagon, two in the agency -- he's announced he's leaving the government next year, but I think he should know by now that, like the Eagles, "you can check out any time you like, but you can never leave." (Laughter.)                 I thought that what we -- what Bob and I would do is talk about the security situation around the world for a few minutes and then talk about the management challenges at the Pentagon, which must be at least as frightening as the security situation around the world to you.  But let's start with the most obvious and the most pressing problem in some ways, which is Afghanistan.                  President Karzai over the weekend said -- and made some fairly startling statements in an interview with The Washington Post in which he talked about the need for the U.S. to ramp back military operations, to stop special operations in the south, which have been very effective; and disturbed General Petraeus, among others, raising a question of what the relationship with President Karzai is like right now.                 What's your reaction to what President Karzai had to say?                 SEC. GATES:  Well, first of all, President Karzai is our partner.  He will be the president of Afghanistan until his second term is out -- in 2014, I think.  And we will continue to partner with him through this -- through this conflict.                        I think -- I think that President Karzai is reflecting the impatience of a country that's been at war for 30 years, has been in this war for 10 years, and was at war for 20 years before that.  And I think what President Karzai was articulating was the desire to see Afghanistan get to the point where, as he referred to in his interview, the way it was in the 1950s and '60s, when the primary American presence was a development presence.  We were building roads, we were putting in irrigation systems and so on.                  We share that desire.  The problem is, we can't get from here to there tomorrow.  And I think that you will see NATO next week -- or this coming weekend probably tackle the issue of transition, probably embrace President Karzai's own stated goal of having a security transition and responsibility for security complete by 2014.                 So think -- I think he was -- my own view is he was expressing the frustration of the leader of a country whose people have been at war for so long.  And I think the reality is he understands what we have to do to get Afghanistan to that point, and the reality is the Afghans are playing a significant role already.                  There's been dramatic improvement both in the numbers and in the quality of the Afghan security forces over the last year.  Sixty (percent) to 75 percent of the forces in the Kandahar operation are Afghan, and that is an Afghan-led operation.  All of the counterterrorism operations, the raids that he referred to, are led by Afghans.                 So we will continue to work with them as a -- as a good partner.                 MR. SEIB:  But is there a gap emerging, though, between the approach the U.S. wants to take over the next eight to nine months and what -- months and what President Karzai's political needs seem to dictate that he's got to ask -- (audio break).                 (In progress following audio break.)  What about Pakistan, next door, which is in many ways the root of a lot of the problems you just described?  Is the arc of the political and military relationship with Pakistan going upwards or downwards?                 SEC. GATES:  I think it's -- I think it's going up.  You know if you had told me two years ago that Pakistan would have 140,000 troops on its western border fighting Taliban and the various other terrorist groups that are in that area, I would have thought that impossible.  They've basically withdrawn six divisions from the Indian border to deal with this problem.                 Is it as fast as we would like?  No.  But if you had told me, again, two years ago that they would have occupied Swat and South Waziristan and be going after these people, be working with us and partnering with us as we coordinate on both sides of the border, I'd have thought that was a reach.  But I think that the strategic dialogue we've had with the leaders of Pakistan when they've come here twice -- and Secretary Clinton and our team has gone to Islamabad once this summer -- I think has really enhanced the quality of the relationship.  And I think that there is a -- there is a growing common understanding of the mutual threats that we face.                  MR. SEIB:  But it's also clear that the strategy in Afghanistan requires the ability to move across that Afghan-Pakistan border to deal with Taliban sanctuaries on the Pakistan side.  It's also clear that that is a source of great tension with the Pakistani government.                 Are you as the U.S. military going to continue to have the freedom to move back and forth across that border as necessary to conduct the operations that you want to have in Afghanistan?                 SEC. GATES:  Well, we don't have combat boots on the ground in Pakistan.  What we are seeing is the Pakistani government, the Pakistani army taking action against some of these safe havens, disrupting them, and, as I suggested, increasingly coordinating with us in -- not in cross-border, but on either-side-of-the-border operations against these groups.  And I think that the Pakistanis taking it on is clearly preferable.                 MR. SEIB:  And are they doing that in as aggressive a way as you would like?                 SEC. GATES:  Well, as we've said all along, you know, they've gotten to where they need to be.  It's -- we're pretty impatient people, you know?  We want everything done yesterday.  But, again, they are doing things that, frankly, we would have been skeptical they would do even a year, year and a half ago.                 MR. SEIB:  And what is your view of the willingness of the government to go further?  Which is to say, the Pakistani government has been very happy to go after the Taliban that threatens Pakistan, less willing to go after the Taliban that threatens Afghanistan.  That has been the fundamental disconnect for some time.                 Is that now over?  Is that phase over?  Do they understand that both versions of the Taliban pose threats that they ought to deal with?                 SEC. GATES:  Well, their highest priority's clearly going after the people that they think are trying to overthrow them, which is the Pakistani Taliban.  But they are increasingly, I think, moving and working with us against the other groups.                 MR. SEIB:  The other source of threat, a terror threat in particular, is Yemen, as we've all discovered as we watched UPS packages from Yemen destined for the U.S. turn out to be something other than UPS packages.                 How serious is the terrorist threat in Yemen?  And more specifically, what kind of tools do we have as the U.S. government to actually deal with the terror threat from Yemen?                 SEC. GATES:  Well, the truth is what we have seen is as we've brought pressure on al Qaeda in North Waziristan, the terrorist movement has metastasized in many ways.  So now we see them in Somalia, Yemen, in North Africa, in the Maghreb.                 And our biggest tools, particularly with respect to Yemen, are the partnership capacity of the Yemenis themselves, and enabling them to go after these guys.  We don't need another war.  And the Yemenis have shown their willingness to go after what we call AQAP, al Qaeda in the Arabian Peninsula.  And they're working with us and with the Saudis and with others.                 And one of the big themes over the last couple of years for us has been what we call building partnership capacity, which is giving them the equipment and the training so they can do the job themselves.  And this is a theme behind a lot of our efforts in Africa, as well as in the Middle East.  And that's our -- that's our best tool in Yemen.                 MR. SEIB:  And in Yemen, is there a government that you can actually work with, unlike Somalia, which seems to be essentially a lawless atmosphere?                 SEC. GATES:  Oh, yeah.  There is.                 MR. SEIB:  And are they -- do they have the correct attitude about dealing with the AQAP problem in Yemen?                 SEC. GATES:  Well, they -- you know, like is the case in a lot of these places, there's -- the president of Yemen has a tribal and management challenge that he has to deal with.  But I would say in terms of going after the terrorists, yes, they do have the right attitude.                 MR. SEIB:  Let me continue the arc of trouble spots in that area of the world by asking you about Iran.  There -- it seems likely there will be renewed conversations with the Iranian government about its nuclear program in the coming weeks.                 Is there anything that you see that suggests that the path toward nuclear weapons capability is anything except straight and narrow for the Iranian government?                 SEC. GATES:  Well, I personally believe that they are still intent on acquiring nuclear weapons, but also the information that we have is that they have been surprised by the impact of the sanctions, this latest round, not just the last U.N. Security Council resolution, but the actions taken by individual countries using the U.N. Security Council resolution as a platform or as a foundation.  And those measures have really bitten much harder than they anticipated.  And we even have some evidence that Khamenei now is beginning to wonder if Ahmadinejad is lying to him about the impact of the sanctions on the economy, and whether he's getting the straight scoop in terms of how much trouble the economy really is in.                 So I think that the sanctions are having an impact.  Whether -- look, the only long-term solution in avoiding an Iranian nuclear weapons capability is for the Iranians to decide it's not in their interest.  Everything else is a short-term solution, is a two-to three-year solution.                 And if it's a military solution, as far as I'm concerned, it will only make them -- it will bring together a divided nation, it will make them absolutely committed to attaining nuclear weapons, and they will just go deeper and more covert.  So I think that the political economic strategy is the one that we have to continue to pursue and ratchet up, and create an exit for them; you know, if you agree to do these things that give us confidence that you're not building nuclear weapons, then there is a way out of the box you've gotten yourself into.                 MR. SEIB:  But you're saying the imperative is to find a non-military solution.                 SEC. GATES:  I think that's the only long-term solution.                 MR. SEIB:  Let me ask you, finally, about a subject that occupied a lot of conversation in this room last night and already before you got here this morning, which is China.                 It's very clear the Chinese have become more aggressive in their attempts to become a regional power.  At the same time, you've managed in the last few weeks to renew a military-to-military dialogue with the Chinese government, which I assume is a positive sign                 What is your own sense of the role that China wants to play in its own region, and the extent to which that may or may not bring it into conflict with the U.S. over the long run?                 SEC. GATES:  Well, you give me too much credit.  I think that from their first meeting, President Hu and President Obama have talked about the military-to-military relationship as being an underdeveloped element of the overall U.S.-Chinese relationship.  And I think that President Hu has reemphasized that, and I think that's the reason that -- and of course he is coming here next year.  I will be going to China, and I'm confident that the reason I got an invitation to go to China early next year is because President Hu thinks this is an important part of the relationship.                 I happen to think it's a very important part of the relationship myself.  And I am hopeful that in addition to exercises and joint efforts in humanitarian assistance, disaster relief, and a variety of other things like that, that we can broaden this relationship to a strategic dialogue so we get a better understanding of each other's strategic intentions, the way we see the world, and so on.                 I got involved in the strategic arms talks with the Soviets 40 years ago.  And I'm not sure whether most of those negotiations ever much led to disarmament.  But the one thing I am confident of is that over that period of decades, we came to a very clear understanding with the Soviets of how each of us thought about things.  And I think that dialogue helped prevent many miscalculations and mistakes.  I'd like to have the same kind of a dialogue with the Chinese.                 MR. SEIB:  Let me turn to the other part of your job, which is the management part of your job.  You -- people in this room run very big organizations.  You run a very, very big organization and you've got some management and budget challenges that are significant.  You've essentially told the Defense Department the budget gravy train is probably coming to an end sooner rather than later.  Get ready for it.  You basically said we have to find $100 billion in savings over the next 10 years or so if we're going to keep force structure --                 SEC. GATES:  Five.                 MR. SEIB:  -- over the next five years, sorry, if we're going to keep the force structure that we have in place.  You also told the shareholders of your company, Congress, that they have to learn to live with that as well.                  How are those two messages going down?                 SEC. GATES:  Well, first of all I think that within the building, I have gotten incredible cooperation.  This has been done in partnership with the military.  And I think one of the -- the challenge that we face is that the growth rate that we are likely to encounter over the next four or five years or the absence of a growth rate forces us to look inside because we need to maintain about 3 percent real growth in the capabilities part of the Department of Defense in order to sustain the force structure that we have today.                 I believe as I look around the world, given the first 15 minutes of this conversation and the other problems -- we didn't talk about North Korea; we didn't talk about a lot of other challenges that we face -- I believe given the kind of challenges that the U.S. is likely to face around the world, and the unfortunate reality that most of our allies are reducing their militaries, that the burden on us and the security challenges are going to remain unchanged and potentially even increase in the future, and therefore the need to sustain force structure.                 This means taking $100 billion out of overhead and investing it in the tooth side, if you will.  One way that I think we've done this and gotten the cooperation of the services is basically telling them instead of the usual budget cut routine -- that it's a zero-sum game -- I've basically assured them all the savings that they can find in their overhead within their service they can reinvest on their military capability.  So what the Navy finds in overhead they can apply to shipbuilding or drones or whatever.  Same way with the other services.                 In addition to that, I hope to find somewhere between 15 (billion dollars) and $20 billion in savings outside of the military services that I can then reinvest in the services.  And I'm asking the services, you know, what are your priorities, where are you going to invest this money, and what are your priorities if I find more money that I can give to you.                 So I think that that has incentivized the services to really look very hard at the way they do business.  This isn't a matter of doing the same things we're doing with 10 percent less money.  It's figuring out new ways to do business, something that you guys do all the time.                 MR. SEIB:  But your political problem now is that the chairmen of the deficit commission, Alan Simpson and Erskine Bowles, have essentially said, that's great.  We'll take your $100 billion, and we'll raise you another $100 billion or so, I guess over time.                 What's your message back to the deficit commission?  You've given at the office, in a sense.                 SEC. GATES:  Well, I met with Alan and with Erskine Bowles two or three weeks ago, and I described the security situation that we have.  And I'm sympathetic with the challenges that they've -- that we face in terms of the deficit.  But the truth of the matter is when it comes to the deficit, the Department of Defense is not the problem.  If you cut the defense budget by 10 percent, which would be catastrophic in terms of force structure, that's $55 billion on a $1.4 trillion deficit.  We are not the problem.                 And I think in terms of the specifics they came up with, that's essentially math, not strategy.  And what we're trying to do in the Department of Defense is figure out how do you -- how do you kill programs that aren't working, are way overrun, are way overdue; how do we develop the broadest range of capabilities for the widest range of scenarios, and sustain the strength that this country needs?  And that means going in with a scalpel instead of a meat axe in figuring out how we change the way we do business.  And, frankly, the idea that defense would take half of the cut in discretionary spending, particularly given what we're trying to do in terms of preserving security is a problem for me.                 MR. SEIB:  Let me -- let me stop there, Alan and see if there are questions from the audience about either the security or the management side.                 There's one right back there.                 Q     Hi.  Tom Glocer, Reuters.                 Let me shift the attention from the geographic hot spots to cyber.  I know you recently created a Cyber Command.  How do you view the threat -- the threat assessment?  And what can we in business do to support the protection in the homeland from cyberattack?                 SEC. GATES:  Well, I -- first of all, I think there is a -- there is a huge future threat, and there is a considerable current threat.  And that's just the reality that we all face.  I think the challenge we have -- we've taken some steps where I think we have arrived at some pretty good protections for dot-mil.  We are working with our partners in the defense industrial base to bring them under that umbrella, to provide them with protection.  And just a few weeks ago, the president approved a memorandum of understanding that Secretary Napolitano and I worked out.                 The key is the only defense the United States has, I think, in -- against nation states and other potential threats in the cyberworld is the National Security Agency.  You cannot replicate the National Security Agency for domestic affairs.  There isn't enough money, there isn't enough time and there isn't enough human talent.  So how do you let the domestic side of the government have access to the asset that NSA represents, while at the same time taking into account the concerns for privacy and civil liberties?                 And what our memorandum of understanding does is create a Department of Homeland Security cell in NSA that has the authority to task NSA, but to do so with their own lawyers present and so on, in terms of ways that will protect privacy and civil liberties.  So you have the domestic security agency, DHS, being able to reach into NSA, in a real-time way, to get the kind of protections that we need.  And my hope is that over time, that this will lead to better protections for both dot-gov and dot-com.                 MR. SEIB:  My promise to secretary Gates was that he'd be out of here at 9:00, because he's got to get to a meeting.                 Thanks very much for coming by.  I appreciate it.                 SEC. GATES:  I'll take one more.                 MR. SEIB:  Okay, one more.  One more quick question.  Right there.                 Q     Secretary, you talked about the necessity to eliminate programs that are overdue or wasteful.  I think you and I share the same passion, for example, on one program, which is an alternate engine, or extra engine, for the Joint Strike Fighter.  Our company also builds Black Hawk helicopter, which has a single engine, which is a T700.  It's performed magnificently.  I think there's erroneous perception that every program in the military needs a backup engine, or extra engine.  And why have we not at this point been able to eliminate, for example, some of this wasteful spending?                 SEC. GATES:  Well, that's a little loaded.  (Laughs, laughter.)                 I would -- I would put it this way -- and it goes to a question that Gerry asked that I didn't answer -- and that is how about my -- how about my overseers on the Hill?  The truth of the matter is, the Congress has been remarkably supportive of what I've tried to do.  I went to the Hill with 33 programmatic decisions last year, and the Hill supported me on 31 of them.  The 32nd was stopping production of the C-17.  I think that will happen in this year's bills.  And so the one remaining issue is the alternate engine.                 One of the things in our acquisition reform is to rely more on competition, but real competition.  Too often, competition in Washington is:  Everybody wins.  That's not my idea of competition.  My idea of competition in the acquisition arena is:  Winner takes all.  And so I want to structure these things in a way where we do have competition.                 I think we have competition for the next-generation tanker, another sore subject.  But I think the more we can do this and the more we can cause industry, particularly on relatively low-technology-risk programs, to share the risk with the government in terms of timeliness and cost, the better off the taxpayer's going to be, and at the end of the day, I think the better off business will be.                 MR. SEIB:  Bob, thanks.                  I forgot to mention the most important part about Bob's background is that before he joined the government, he, like me, had the great good sense to be born in Kansas.  (Laughter.)  So I think his Midwestern stock rises to the top.                  Thanks very much for coming by.  I appreciate it.  (Applause.)