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Discussion on Global Security in the 21st Century with Secretary Carter at the Wall Street Journal Chief Executive Officer Council Annual Meeting, Washington, D.C.

MODERATOR: Let's move straight on with our program. As you know, obviously the terrorist attacks in Paris on Friday have really changed the security picture, not only for Europe, but for the United States and for the rest of the world, and we're very fortunate and privileged to have with us tonight the person who can take us through this and take us through the implications for U.S. and for the rest of world -- for U.S. policy and for the rest of the world.

So ladies and gentleman, please join me in welcoming Secretary of Defense Ash Carter and my colleague Gerry Seib.

GERALD SEIB: Thank you, Mr. Secretary for being here. Busy day I can only assume.


MR. SEIB: You know, I would say at the outset that Secretary Carter comes to this job well equipped he was deputy secretary of defense. Before that was undersecretary of defense. Before that was assistant secretary of defense.

But more importantly, for me, we had lunch I think together after you left your post as deputy secretary of defense, and it was encouraging to me because you're a physicist by training. My son is a physics graduate, and you led me to believe that you can actually get a degree in physics and have a productive job. (Laughter.) So I'm very grateful for that.

You know, whatever we were going to talk about a week ago obviously it changed on Friday because of what happened in Paris.

So let's start with that. I'm curious what you have learned about ISIS in the last three our four days that you didn't know a week ago?

SEC. CARTER: Well, I wouldn't say that anything that happened over the last few days is surprising to me -- shouldn't really be surprising to anyone. This is an enemy that needs to be defeated -- will be defeated. Stands for the opposite of everything that we stand for and civilized people stand for.

Obviously I'm sad that it happened. That's a terrible tragedy for the French people. It has had the effect of galvanizing our cooperation with France, and that's one of the things we've been doing over the weekend, strengthening our intelligence cooperation with them. They took some strikes last night. They'll take some strikes again this morning.

I hope that other European nations in the same light - you know, we've been at this now for a year. We're looking to do more. We're looking for every opportunity we can to get in there and go at ISIL. But we need others to -- you know, we can help those who help themselves. We need others to get in the game as well.

So I'm hoping that that this tragedy has the effect of galvanizing others as it has galvanized the French, and really throughout Europe. Because remember, Europe has been participating in part in operations against ISIL, but not notably, most of them in Syria so far.

Also of course as separately but related, not in my judgment spending enough in general on their defense, and that's important. They need to get in the game also. They share civilized values with us. They share a history with us. And they need to get in the game of protecting our people from this kind of thing.

But I wasn't surprised by it. Obviously I'm disappointed. We're determined that we defeat ISIL, and we will.

MR. SEIB: There's obviously been a change in the French attitude if not -- and the French strategy in dealing with this threat.

What's changed in the U.S. approach in the last 72 hours? How has this changed what we're going to do?

SEC. CARTER: Well, it's a little easier to say what's changed in the last several weeks. And this isn't because of a change of mind or a change of policy or a change of heart; it's because we're looking for opportunities.

So, I'll give you some examples just in the last few weeks. We got Jihadi John. We got the head of their nest, their metastasized nest in Libya. We started some sustained strikes on oil infrastructure, which is one of the ways they get revenue in both Syria and Iraq.

We are identifying and aiding able and capable and motivated ground forces there. This is an important point, Gerry, because the -- if it were just us versus ISIL, we could defeat ISIL. The problem, as we've learned in Iraq previously and in Afghanistan is sustaining the defeat. For that purpose we need capable and motivated local forces who can keep the place running without extremism after ISIL has been defeated.

Now they're hard to come by in Syria an Iraq, but they do exist, so in Iraq we have the Kurds in the north, who have been very effective, and we've been helping them. There are elements of the Iraqi Security Forces, the counter-terrorism forces, certain elements of the Iraqi army that are effective. Not nearly enough Sunnis in the fight there.

Over in Syria -- obviously there's a civil war going on, but there are Syrians there, some Arabs down in the south. Some along the Jordanian border. So in all of those places we are enabling them and they're making progress.

I'll give you an example, the road that connects Mosul over in Iraq and Raqqah in Syria for those who know the geography, those -- that's the heart of ISIL respectively in those two key countries. With our help some Kurdish forces have managed to seize that road. That's an important piece of strategic geography.

Over in Syria, we're aiding some forces that are actually heading toward Raqqah, and from the air we continue to intensify that. Our intelligence gets better with time.

So just in the last few -- and you'll see us continue to do this. We're looking for opportunities to get at them, and we'll continue to do that until they're defeated.

MR. SEIB: But defeating them ultimately means defeating them on the ground, and the ground forces that you have to work with now seem weak and problematic. I mean, the Syrian moderates, a weak force. The Iraqi army has been disappointing in some ways. The Kurds, while very effective, create problems for others in the region including -- and especially -- the Turks. Shiite militias look like stalking horses for Iran in some cases.

How do you create a ground force of Sunnis who have a stake in the outcome here, and who can effectively, as you say, defeat ISIS or ISIL, and keep them down in the long (inaudible). Where do you get that ground force?

SEC. CARTER: This is one of the sad realities with Iraq and Syria, so they're harder to find than you would like.

In the case -- so let me take Iraq, since those situations have some similarities but are different in the following respect. Iraq still remains an integral state. It's a multi-sectarian, and testily so.

But we are supporting Prime Minister Abadi in his efforts to govern it in a way that keeps Sunni, Shia, and Kurd in some -- in a phrase he uses, decentralized or federated union, simply because the alternative is sectarian war.

We know where that path leads.

That said, Prime Minister Abadi, and I've spoken to him a number of times, is trying to do the right thing, but Baghdad is a complicated place. And in particular we have not gotten from the Iraqi government to date all of the authorizations for Sunni forces there that we need.

And it really needs to be -- remember it's the Sunni areas where ISIL is. So those communities and those people need to decide that they need to participate in this fight, and then hold that territory.

We can enable them, we can help them. They need the will to fight. And the will, we can embolden them, but we can't create will. We can definitely create the capability and the conditions under which they can succeed.

But we can't substitute for that. We know what that -- because otherwise we'll be there forever. So we need to enable them. That's basically our strategy. Our strategy is to destroy ISIL in its heart of Iraq and Syria, which also protecting our people, protecting our borders, working their finances, foreign fighters, lone wolves, the whole deal.

It is, because it metastasizes worldwide, including to our own country. We have to not only destroy it in its heart, which we must do, that's necessary but not sufficient. We need to do (inaudible) around the world also.

MR. SEIB: Can you -- the Russians are obviously engaged in Syria, as we are. But they're engaged for what seemed to be a dramatically different purpose. They're engaged to protect the Assad regime and preserve it. We're engaged to defeat ISIS and to get rid of Assad.

How do we and the Russians come together in a common strategy in the midst of this threat that we've seen so dramatically displayed in Paris.

SEC. CARTER: Well, they've made a mistake. And I've told this very clearly to my -- said it publicly but also to my Russian counterpart. Their strategy is doomed to fail because it has the effect of, as you said, supporting Assad, which fuels the very civil war that produces the extremism, which they rightly fear.

I mean, they rightly fear it. They've had the history in the Caucuses, with the Chechens, and so forth. They have tasted this form of terrorism.

Now they said they were going to come in to fight ISIL, which by itself would be fine. But that's not what they did. They went in and propped up Assad. It's possible, just possible, Gerry, but I'm not sure, and the secretary of state is discussing this with them, that they can get on the right side of things here, which is promoting a political transition in Assad -- in Syria, which has to include some of the very people they started to bomb when they came in.

These people who have to be part of the -- were moderate opposition, who have to be part of the future of Syria. And then it's fine if they get in the game of actually fighting ISIL.

But they came in saying they're going to fight ISIL. That's not what they did. They fought moderate opposition. And so they were way off, way off track, and basically a strategic error on their part.

We could not associate ourselves with that, which is why we didn't cooperate or coordinate with them except to -- dealing with making sure we didn't have any incidents in the airspace over Syria, because they were wrongheaded and backwards in how they're approaching it.

MR. SEIB: From our point of view, from the American point of view, can we grit our teeth and just put up with Assad for a while as the lesser of two evils in Syria in order to defeat Islamic State?

SEC. CARTER: Well, there has to be a transition. And that means Assad receding. He has to be willing enough to not, you know, keep slogging it out here, and slaughtering people, and creating refugees, and all this stuff.

We do want there to be enough of the structures of the Syrian state so that the place isn't a complete mess at the end of this civil war. So we want something of the government of Syria to perdure here. That's important. Assad himself, no.

Now who can persuade him to go? And this is where the Russians could actually be helpful. So if they, you know, get on the right side of this, it would be trying persuade Assad to move aside, keep the structures of the state going, move the moderate opposition into that. And try to put some decency back in this -- what is a mess in Syria now.

That's the path we're behind. And we hope that since they have such influence, and they'll use to good...


MR. SEIB: So is their commitment to Assad or to the regime? Is it to Assad personally? Is it to the regime? In other words, can they envision a Syria they're happy about with Assad gone?

SEC. CARTER: Well, you know, they say, Gerry, that they do not have a commitment to him personally. And they share the desire to keep some structures of the state, very Soviet phrase, is the way they put it going.

And if their actions match those words, then that would be something we could associate ourselves with. But they need to see that they're on the wrong side of things, get on the right side, and then -- because they could be persuasive with Assad, no doubt about that.

They and the Iranians are the two that have the most influence with Assad.

MR. SEIB: Gauge for us, if you could, the level and the trajectory of the Islamic State terrorism threat here as you see it. Obviously what we saw in Paris raises a whole new set of concerns, not just for people in Europe, but for people in the U.S.

What's your own view of the trajectory of that threat?

SEC. CARTER: Well, obviously we've been concerned about it since it started last summer because they say they have the aspiration to come here. Their capability is not what it is in Europe. There isn't that -- that much is eased geographically in movement of people.

We don't have some of the population that has longstanding terrorist inclinations that are in some of the European countries. So the most immediate danger we face is more of the lone wolf.

And I'll give you an example. I was down in Chattanooga two months ago. And we all remember that incident. That was a very serious matter for me, because they were six of our service members who were killed.

Now, who did that? Well, this is a kid who was born in Chattanooga, grew up there, his parents were engineers. And he went on -- you know, one of these sort of losers, lost kids, went on the Internet, got all frizzed up, and then went out and bought a firearm, went out and killed people.

Now, you know, we can't have that. So we can't have -- some of that is just protecting our people and the kind of protection you do against aberrant people all the time anyway. But here you have a particular cause. And we need to show that that's not a successful cause, and that civilized people are determined to defeat it.

And at the same time, you know, while I'm at it, I've been talking a lot about what we do in Syria and Iraq. But since this is a time when people are really focused, as they need to be, on defeating ISIL, I said it has to be a multipronged thing. We have to take care of it at its heart there. But we also have to do the, yes, surveillance and intelligence work that I know has been controversial.

But, you know, we're trying to protect our country and protect our people. And we need to be reasonable about that. And the use of social media by these guys, the use of encryption by these, we need to find a way that is consistent with a free and open Internet, but which also allows us as public officials to protect our people.

We need to stop these -- we need to watch our borders for the foreign fighter flow. We have to pay attention to the financing that they guys are getting. We need to get others around the world to join in, because these guys -- there are guys in Southeast Asia.

I was in Southeast Asia a couple of weeks ago. And not many, but there are little nests of these characters in Southeast -- it's the metastasis of this has to be taken care of as well as the parent tumor, which is in Syria and Iraq.

We've got to do all of that.

MR. SEIB: I guess the broader question, if you rise above the details, is whether something is now going to change, not just in the way France is approaching this threat, but in the way the U.S. is approaching this threat.

In other words, are we now on a path to simply do more of the same, or is there an inclination to do something more and different?

SEC. CARTER: No, well, certainly an inclination to do more. And consistent with the strategy I described, which is at the end of the day there have to be people in Syria and Iraq who are keeping the lid on after the war is won.

And consistent with that, we're looking for new ways of doing things all the time. So an example of -- I won't get into any detail on this, but I told you we were going after oil infrastructure there.

Well, one of the -- we're finding clever ways of doing that. We get better and better at this all the time.

MR. SEIB: Find a clever way for me.


SEC. CARTER: I want to be careful, because I don't want these guys to know what's going on. But, you know, we're thinking -- well, I think "Jihadi John" probably overestimated his safety, to put it...


MR. SEIB: It's seems safe to say.

SEC. CARTER: Let me put it that way.

MR. SEIB: And those guys driving the oil trucks over the weekend seem to have overestimated their safety too.

SEC. CARTER: Yes. Although that was an example I'm loath to use because we want to do it again. So I don't want to say exactly how we did that. But so we're thinking -- and I'm just one guy, right, but I've got 2.8 million people who are there for a reason.

They care about the mission. And particularly those who get to the top, like -- I was just telling Gerry on the way in, I've had the opportunity to name and recommend to the president five new joint chiefs since I've been secretary of defense.

The bench is amazing. You know, I mean, these guys didn't get to the top, like none of you did, without ability. There's tremendous experience, tremendous ability there. And if you think back, you know, whatever you think about the wars in Iraq and Afghanistan, but I was, all the time I've been all-in for them, right?

We have people fighting there and people -- so I'm all in. But I've got to tell you, the ingenuity of our people in those -- those were new kinds of war, this counterinsurgency thing.

You'd see a captain, a kid in his 20s, running a town, sophisticated political, economic, social issues, as well as his military craft. And plying his military craft in a -- with an art form, counterinsurgency, which is different from all the others kind of military -- you know, more traditional military things, which they're good at as well.

I'm so proud of them. I just think there's no other military in the whole world that is adaptive as ours is. And so they're going to adapt also to this ISIL thing, while we're adapting to everything else going on: Russian activity in Ukraine; Asia-Pacific, we haven't talked about that, but I said I was out there a couple of weeks ago.

We've got lots of things to do. But this is a pretty capable crowd.

MR. SEIB: Yes, I wanted to talk to you about those other areas. Let me ask one final question in this ISIS-ISIL space, which is, I wonder whether you -- net-net whether we underestimated the reach and the ability of ISIS, A.

And, B, whether these ISIS guys, based on what we just saw over the weekend, are better at avoiding detection by Western intelligence agencies than maybe we thought?

SEC. CARTER: Well, there's no question about the second part. I think as far as the first part is concerned, they represent a new phenomenon. And I'm not the first one to say this. But, you know, al Qaeda was the first Internet terrorist group.

These are the first social media Internet group. So just like, you know, people are amazed at how things go viral and crazes happen, and so forth. In the terrorist space, this has turned out to be a very ugly capability for people like this to have.

Now we're trying to climb on top of that in every way that we possibly can. There's no question that it represents a new phenomenon. An organized, civilized society has to figure out how to protect itself from this kind of stuff.

And is that a work in progress? You bet it is. We'll do it. But, you know, that is a new phenomenon.

MR. SEIB: You mentioned Asia. I wanted to pivot at least for a bit to China. You've spent more time than most thinking about this issue in the last couple of months. And in particular the Department of Defense has decided in recent weeks to challenge this Chinese claim to the artificial islands it has created in the South China Sea, which you did by obviously running ships through what they claim to be territorial waters.

What I wonder is whether you have, since you did that, detected any change in Chinese behavior or any change in the kind of dialogue, if that's the right word, that you have with the Chinese on this subject.

SEC. CARTER: What we did and will continue to do isn't new at all. We have been sailing, the United States Navy, in the South China Sea for decades and decades and decades.

And so we did that. We're going to continue to do that. Why is anybody even noticing that? They're not noticing it because the United States is doing anything new, they're noticing it because China is doing something new.

What is China doing? China is making extravagant claims for the South China Sea. By the way, they're not the only ones who are doing that. There are other claimants as well, longstanding disputes, but trying to settle those claims not by talking about them but by going out to reefs, dredging them, and then building airstrips on top.

That has gotten a lot of attention, and in turn has caused people to notice that we're still doing what we've been doing. So I just want to be clear, you called it a challenge, we're doing what we've been doing for 70 years.

Why is that important? And here's why. When we talk about the Middle East, so the Middle East is in the newspapers every day, and the Asia-Pacific, where half of humanity lives, half of the economic activity, which is far more consequential for America's future than any other single region in the world, including the Middle East, where most of the growth markets for all of the businesses in this room will reside.

Hugely consequential to America, now why isn't that in the newspapers? Well, thank God that there isn't conflict there. Why is that? Well, the single most influential factor for seven decades has been the pivotal role of American military power.

There's no NATO. There's nothing that automatically keeps the peace. It has been the stabilizing presence of the U.S. military forces. We aim to keep that going.

Now if the Chinese think about it, they -- and many Chinese do think about it this way, they'll say, that is the environment of peace and stability in which they've been able to do their thing. Remember, like the Japanese, Japanese miracle, then there was the South Korean miracle, then the Taiwan miracle, then there's a Southeast Asian miracle, and now India and China.

We're all in favor of that. We think that's good. But it isn't a birthright to have peace. You have to work at it. And there has to be some system of that. And you can't -- so we talk about something we call the "rebalance," which is to make sure that we continue in the era after Iraq and Afghanistan, when we begin to rethink where we put our defense resources, that we make sure we're putting enough resources in that region to keep a good thing out there.

That's what we're doing. That's the meaning of our presence in the South China Sea.

MR. SEIB: But if the Chinese benefit from that atmosphere of stability that you just referred to, why do they seem so eager to challenge it in various ways right now? In other words, isn't there a contradiction there in the way they behave and their interests?

SEC. CARTER: Well, there is no question about it. Look, I'm not one of these people who believes that conflict with China likely. It's certainly not desirable. But, again, this is not -- peace is not birthright. It's something we've got to all work at.

And there are two thoughts that coexist in Chinese strategic thinking. One is, look, things have been pretty good for us. We've been able to develop politically and economically in a remarkable way, free from anybody -- nobody has molested them as they've done this.

So that's a pretty good deal. And so that's one thought. The other thought is we've been down for hundreds of years, in particular for the last 150 years at the hands of what they call "a hundred years of humiliation," and all that.

And now it's our time to rise and shine. And that kind of hubris is dangerous. And if that, you know, gets out of hand, so to speak, it will lead China in a direction that's not good obviously for the region.

And we will check that. But also, not good for China in the long run. I don't think that's the preponderant trend or strand in Chinese strategic thinking. But there's no question it's there.

So our policy is to, as far as China is concerned is to encourage the better strand, but, and this is important, China is not the only audience here. Remember, everybody else lives there.

I just came back from the region. I was in meetings with virtually everybody in the region. Chinese behavior is having the effect of driving everybody to seek more relationship with the United States, military-to-military, other security relationships.

We have incredibly strong allies out there that are all getting stronger: Japan, South Korea; Philippines want to do more; Australia; Thailand; we're doing more with India; we're doing more with Malaysia.

I was out on the Teddy Roosevelt, an aircraft carrier, with the Malaysian defense minister. A few months ago I was in Haiphong Harbor, those of you who are old enough to remember, Haiphong Harbor is Vietnam.

Vietnam is asking for more from the United States, the single thing that is galvanizing that drive to us is concern about China's future. That's not smart either of China to -- and, of course, we're not trying to divide. We're not trying to divide into our camp/their camp.

That's not -- our policy is an inclusive one. That's what we've been doing 70 years.

MR. SEIB: But to go back to the starting point about the South China Sea and the islands there. In a way, I think what you're saying is that the challenge -- and that's my word, not yours, and I accept that, but what the action that you took seems to have not produced a response from the Chinese. And that, in a way, is a response, right?

SEC. CARTER: Well, we'll see. We'll see. But, again, that's not the only audience.

MR. SEIB: Yes.

SEC. CARTER: It's everybody else as well. And I think that -- not only do I think, I observe, I experience the strong and growing desire, and as secretary they come to me all the time. Will you exercise with us? Will you train with us? Can we buy your equipment? Can we send people to your academies?

That is an enormous demand signal out there for what America has provided for 70 years, because they know that's what has kept the lid on in an area where the wounds of World War II never healed, animosities are still -- I mean, just look.

You don't have to scratch very hard for -- and not just between China and other countries, among our friends and allies it's no secret, for example, that things have been tense over time between our Korean allies and Japanese allies.

They're both allies of ours, but they have a tough history with respect to one another. So the region is filled with unresolved historical claims, of which the South China Sea is just one.

MR. SEIB: Let me touch on a couple more areas and then I want to leave time for a couple of questions from the audience.

But, you know, we were talking a second ago about Russia and President Putin in the Syrian context. But let me ask you more broadly. I mean, you have a president in Russia now who has embarked on a strategy that clearly the U.S. government is unhappy with in Syria.

Obviously the intimidation factor in Ukraine has been a continuing problem for a couple of years. There is a sense that there is a challenge under way. Part of it's political but part of it's military from the Russians.

How do you respond to the challenge?

SEC. CARTER: Well, we've got to respond to it. And we are. You know, this is something that for a quarter century we had not -- since the Cold War ended -- been as concerned about.

So we are making adjustments in our own investments and our own posture to take into account Russian moves, and make sure we stay ahead. And we're also working with NATO to strengthen NATO's posture.

And that involves a number of things. We're positioning heavy equipment in NATO allies, working on new schemes of defense, both of territory and against the little green men phenomenon, so-called hybrid warfare. And I think you've used that phrase here.

It's not just the old Fulda Gap, for those who remember the Cold War issue of tanks crossing over. It's the little green men phenomenon as well. We need to fortify our European allies. And this is a new playbook. This isn't the Fulda Gap of old.

This is a new playbook. And it's to maintain peace and stability in Europe.


MR. SEIB: Hybrid warfare being proxy forces, misdirection plays, propaganda, a different way of exerting power?

SEC. CARTER: Exactly right. And we need to counter that too. And we need to fortify our European allies to counter that. So we've got a lot to do, and that's just another way of saying that we need to continue to be innovative.

We innovated a lot when it was -- came for Iraq and Afghanistan. They were new kinds of -- one of the things I'm really proud of in our Defense Department is a long history of innovation.

It goes back -- you know, I started my career in science and technology. As you said, we were doing stealth at that time. We were doing a whole lot of stuff in space. Missile defenses, all those were new capabilities.

And those of you who are in high technology industry know I'm trying to reach out to our industry, building those bridges.

MR. SEIB: I wanted to ask you about that, as a final thought before we take questions. But you have spent a lot of time in Silicon Valley, which is not a normal place for a secretary of defense to go, necessarily.

You want to build bridges for the benefit of the Defense Department to Silicon Valley. It's not a place that has traditionally been comfortable with either big government bureaucracies in general or, dare I say, your government bureaucracy in particular.

Are you knocking down those walls?

SEC. CARTER: Yes. We've got to knock down those walls. The wall is too big between defense and non-defense. And it has gotten that way over time. And when I started in my career, it was much of a reflex for people to consider the defense -- and I understand that's not -- believe me, I'm not going to ask anybody to adapt to us.

We've got our own issues to deal with in terms -- I ask our -- tell our people, we've got to think outside our five-sided box. We do need to think. We need to be less bureaucratic. They don't need to be more like us. I'm trying to make us connect to them.

But you have to understand there's a generation of people who haven't been subject to the draft. And they need -- but my experience is they understand the mission. They're inspired by the mission.

We've just got to give them a way to connect with us. Maybe they don't want to join the military, maybe they do, maybe they're willing to come in for a year or two. When I started my career, I thought I was just going to do it temporarily.

And then I found that it was one of the most meaningful things that I can be doing. There are lots of people like that. I'm looking for ways of giving people the opportunity to come in and out, to make us more permeable.

And so that this new generation, and these new technologies are something that we are user-friendly for. That is going to require us to change. I don't expect the big world of technology out there to change. We don't control that anymore.

When I started my career, we were the big dog. Now we're a big dog. But not all technology comes out of the government. And not all technology comes out of the United States.


MR. SEIB: It's kind of reversed in fact, right? I mean, they used to need the products of your research, you now need the products of their research.

SEC. CARTER: Right. And so -- and we're not going to get that by standing there with our arms crossed across our chest and asking people to do it our way. And so we've got reach out.

So I want to create those channels that allowed our people to learn from one another, allow people to go back and forth, allow careers to be different, including careers in government.

You know, for those of you who have older companies, you remember the old HR department of vintage days, right? Everything done in paperwork, they decided where you were going to go, then they sent you there.

Life was, you know, kind of an escalator where you got on and then you waited and it took you up. Kids don't want to live that kind of life now -- oh, it was also, by the way, and this is worth noting, it was the place -- one of the only places where female executives could get ahead.

That was the HR department of old. Well, we can't have that in the uniformed or the civilian side and still have what we have, because we talk about technology, but the thing that makes us the finest fighting force the world has ever known isn't our technology, it's our people.

Our people are amazing. And I've got to make sure -- now I got that from my predecessors as secretary of defense. I've got to leave to the people after me, 10 years, 20 years from now, as good a group of people and as good at connection to American society as I enjoy today.

And like everything else, I've got to work on the future. I'm working on ISIL. I work on Russia. I work China. But I've got to be thinking 20 years ahead also because I've got to hand this treasure over to the future so that we are still protecting our people, we're still sticking up for the things that we think ought to be stuck up for.

MR. SEIB: I've got time for a couple of questions, and Secretary Carter has agreed to take them. We can do one there and one there.

QUESTION: Yes. Secretary, my name (inaudible) from Germany. What do you think about German policy or more their policy maybe of Angela Merkel concerning the refugees? Especially that we encouraged them to come to Germany, also against national security?

SEC. CARTER: Well, to answer that, you would need to unpack the refugee flow a little bit. The picture you get casually, I'm sure you know better, is that they all come from Syria, they don't.

They're coming from a lot of places. They're not all women and children, although tragically there’s women and children in there. Most of them are young men looking for work.

Now, you ask about Germany, and Germany, there are differences of opinion, I think, is the honest way. And Chancellor Merkel is trying to balance these. There's a view that we can't absorb many more of these people, that they're a welfare burden, they're possibly a terror burden.

But there's another view also which is that Germany is demographically aging and needs young professional people. And whether they're coming from Syria or Libya or Afghanistan, sadly, these are some of the most best professionals in those societies, who have decided to bail, that there's no future for them, which is a whole other problem for those societies.

But for Germany, I talked to a German executive a few months ago. I won't name the company, but they had recruiters at the train station. And they were taking people off and bringing them in to their company.

So this is complicated. And I think that Chancellor Merkel is trying to work all of that. I think Europeans are having to rethink in general the EU policies. And, you know, how open "open" can be and still be safe and do right by the people who do come.

I was down in Italy, take another example, so not just to single out Germany, because all the countries are -- I was down in Italy with my counterpart, the Italian defense minister down in Sigonella, where we happen to have a base, and we work with the Italians and others out there.

I was visiting our folks, our guys down there. But I went with her, the Italian defense minister. And we were looking at what was happening in the Mediterranean. Now there they are. You know the boot.

It pokes right out there in the Mediterranean. Libya is not far away. Libya is obviously in turmoil. And there are plenty of people who are just getting on a boat in Libya and going over to Italy.

Now on your one hand, your heart goes out to these people. And you don't want somebody just floating up and saying, well, go away, you know, and try to get home. So you have to do the humane thing.

At the same thing, there's a limit -- at the same time, there's a limit. And so (inaudible) the Europeans are trying to strike that -- a balance. But I do observe in Germany that in the business community there is some ambivalence about this because there is a side to it which meets labor needs that German business has because it's an aging society.

The United States doesn't have the same demographic challenges that many do: Japan; China; Russia; Europe. And these are places where demography, which is, how we say? There's the one predictable aspect of human life is demography?

And demography is a big issue for lots -- unfortunately our society, generally speaking, doesn't labor under the same burdens going forward.

MR. SEIB: We'll take one other question here.

QUESTION: Thank you, Gerry.

(Inaudible) from (inaudible) Holdings. Thank you, Secretary Carter. As you were going back to you observations on the war on terrorism and Islamic terrorism, American leadership is going to be pivotal in this time which is an era of extraordinary opportunity and of perils.

The question I have for you and want your thoughts on is, if this leadership is entirely characterized or driven, to a certain extent, by fear at the perils, and not focusing enough on the opportunity and in the process giving short shrift at times to what I think are critical Judeo-Christian value systems of humanity and compassion.

I think we might win in the short term but perhaps weaken ourselves in the medium term.

SEC. CARTER: Well, I mean, sure, I mean, fair point. I -- one of the reasons why we are popular partners, magnetic in terms of being able to build and have that leadership role is because of what we stand for. There is no question about it.

You see that from Asia to Europe to the -- and I'm incredible proud of that on behalf of the United -- so I think we do operate out of more than fear. We operate out of loyalty to our friends and to what they stand for, to what we have stood for -- talked about the Asia Pacific and peace and security in the long run.

So it's not just fear, and it's not just about us. And the fact that we don't just operate out of fear; we don't just (inaudible) us, is one of the reasons why people want to work with us. They don't want to work, I mean, with some of the other countries I've named. They're not attracting new partners; they're attracting anxiety. The United States isn’t like that. I think that's a fantastic thing.

And I'll just close on one thing, is I am also very -- even though you'd say, well, you're in the business of dealing with threats -- I'm also in the opportunities -- I feel great opportunities for our country, you know, I really do. We have lots of things going for us. We have this tremendous innovative culture. I mentioned we have good demographics. We have strong character and value built into lots of -- we have problems, sure, in our society, and -- so I -- you know, my -- really, all of our roles as leaders is, you know, is not just to protect what we have, which has to be done, but it's also to capitalize on the really bright opportunities that our country has and our people have.

And if you get people to feel that as well as the fear -- and a lot of folks do that. You know, that's why they join. They want to be part of something bigger than themselves. They want to want to wake up every morning and say, you know, wow, I was, you know, part of a great cause. That's why I hope a lot of folks will work with – now our traditional defense industry folks do feel that way. And I always tell them, you're part of the force, as far as I'm concerned.

You know, we don't do -- I always tell people, we don't build anything in the Pentagon, right. You can go in there, you know, we're not building -- no airplanes being built in the Pentagon. We buy all this; that's the American way.

The Soviet Union tried a different way, and didn't work out very well for them. And so we depend on private industry, but at the same time a lot of those people get inspired to come in and be part of this great future opportunity. So I'm not a pessimist at all; we've got a lot going for us. And so it's not all a defensive game at all.

MR. SEIB: Secretary Carter, it's been very nice to spend some time with us on a busy day and a busy week. And I appreciate it very much.

SEC. CARTER: I appreciate you having me.

MR. SEIB: And we're blessed to live in these interesting times is all I can I say. So anyway, thank you again.

SEC. CARTER: Thank you.

MODERATOR: Thank you you all. Good to be with you. Appreciate it. Thank, Gerry.