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FAREED ZAKARIA GPS

Interview With George Shultz

Aired November 14, 2010 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


FAREED ZAKARIA, HOST: This is GPS, THE GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

This is a special edition of GPS, coming to you from the CNN studios in Hong Kong. You see, while President Obama has been traveling in Asia, so have I, and I've actually been struck by the change of mood in Asia over the last year.

One year ago, if you were traveling around here, the talk was all about the irrelevance of the United States and the dawn of Chinese power. Experts would point out that China had massively expanded its aid to Southeast Asia, dwarfing that from Washington. When China would stand up to the United States on climate change or currency, well, people in Asia would say that's the new world order.

But, over the past year, China's behavior in Asia is causing something of a rethink on that vast continent. The signal event was probably the scuffle on September 8th in the waters around the Senkaku Islands, which are claimed both by Japan and China.

It wasn't the details of this incident which involved a Chinese fishing boat that worried people. Rather, it was China's response - tough, unyielding, up the ante in many cases. So the Japanese, the Indians, the South Koreans all looked at that and wondered, is this our future in an Asia that's going to be dominated by China economically?

The sharpest rethinking appears to be taking place in Tokyo. You see, Japan had long believed it could play a kind of quiet and non- confrontational role position between China and the United States. But listen to this, quote, "Japan and China now stand at ground zero, and the landscape is a bleak, vast nothingness."

So writes Japan's most important foreign affairs commentator, Yoichi Funabashi, in a letter that he sent to dozens of high-ranking friends in China. "If China continued to undermine its own peaceful rise doctrine," he wrote, "then Japan would discard its naivete, lower its expectations, acquire needed insurance, and, in some cases, cut its losses."

Japan's foreign minister described Chinese behavior as hysterical.

China has managed its rise with great care so far, making sure not to give the impression that it was an aggressive rising power. It remains unclear whether this recent behavior that's been over the last six months in a variety of different areas is a misjudgment which will be corrected or whether this is the new normal that Asian countries and perhaps the world will have to get used to as China ascends economically.

In any event, one thing is clear. It was easy to accept, even welcome, the rise of China when it was an abstraction. Now that it is a hard reality, the geopolitics of Asia will get interesting.

We have a great show for you today. We'll go more in depth on the president's trip to Asia with a panel that includes someone who can comment on each of the president's stops -- India, Indonesia, South Korea and Japan. What did and didn't Obama accomplish here in Asia?

But first, the main event from back in the United States. America's eldest statesman, George Shultz, on foreign affairs, of course. But before Schulz was Secretary of State, he was Secretary of Treasury and Secretary of Labor and Director of the Budget. He's going to tell us what's wrong with the economy and what he thinks the Obama administration needs to do to fix it.

Then, "What in the World?" Some say it's the most innovative place on the globe. I'll show you some of its fascinating inventions and tell you what lessons tiny Singapore could possibly teach the United States.

And, finally, what does the president really miss about his childhood home in Indonesia? You'll be surprised.

Let's get started.

U.S. unemployment is at 10 percent, the budget deficit is at 10 percent, and growth is under two percent. What's to be done?

I wanted to ask George Schultz. Most remember him as the Secretary of State who helped end the Cold War, but he's also a great economic mind. He has a Ph.D. in Economics from MIT, was dean of the Chicago Business School, ran the country's biggest engineering firm, and, of course, held three other cabinet positions all related to the economy - Budget Director, Secretary of Labor and Secretary of the Treasury, as I mentioned.

He is now a distinguished fellow at the Hoover Institution at Stanford. He's just published "Ideas and Action," which includes his 10 commandments for negotiation. Shultz was an early supporter of George W. Bush and has been critical of President Obama's economic policies. So let's listen to him and find out what his solutions are.

George Schulz joined me from Stanford University.

(BEGIN VIDEOTAPE)

ZAKARIA: Thank you for being with us, Mr. Secretary. GEORGE SHULTZ, FORMER SECRETARY OF STATE: My pleasure, Fareed.

ZAKARIA: Let's start with the - the short-term economic crisis, because you've written some things about the longer-term issues, and I want to get to them, as well.

But, right now, you have a situation where unemployment remains stubbornly high, the consumer is still not spending, perhaps shell- shocked from the - the bursting of the credit bubble, businesses are still not spending, they still have a lot of capacity and don't see the need to add capacity. In that circumstance, many people say, look, the government is the only player who has the capacity to do something.

What do you say to those who say - who believe that the government - if the government doesn't spend, and, in fact, if it starts cutting, you are going to put an already fragile economy in a downward spiral?

SHULTZ: I think what we have had, in effect, is an anti-growth policy. The name of the game is economic growth, and we've had a policy, set of policies, that maximize uncertainty, that threaten to reduce incentives, where you don't - you're - you have little quick fixes that aren't permanent. And all the evidence shows that if you have something that's temporary, it doesn't really change behavior very much. And also, a sense that the playing field can change, no real commitment to the - to rules as distinct from administrative actions.

Tell us what the playing field looks like, and when we know the rules and we're confident you're not going to change them in the middle of the game, then we'll play the game. But if you keep saying to us we don't know what the rules are and, to the extent that there are some, we're going to change them in the middle of the game, I say well, I don't want to play that game. So that's why I say we've got to create some certainty and we've got to get back to paying attention to incentives, and we've got to get back to having people have skin in the game.

So all these things add up to an anti-growth policy, and what we should do is change it to a growth policy. That's what we need to do.

ZAKARIA: So let's talk about that. What would a pro-growth agenda that George Shultz would write look like? What are the four or five key elements that are going to get businesses to start spending again?

SHULTZ: Number one, I would enact a very short bill that says the income and inheritance tax rates that are in effect in 2009 will remain in effect until Congress changes them, period. Very short. One-sentence bill. Be so refreshing, instead of these thousands of pages of bills. So that would create some sense of where the tax rates are going to be.

Then I would rein in this excessive government spending. It's just totally out of control. And I would tackle the entitlement programs.

Let me come first to social security. Somehow, people are afraid to touch it because they're afraid of reactions from older people. I've examined this issue with some care. I have yet to see any proposal that changes anything as far as older people are concerned. This is not about older people. It's about younger people and preserving the system for them.

Then you've got to look at the health care system. Its costs are rising. Everybody understands that, sees that. The recent health care bill, if anything, makes that cost problem worse.

And so we've got to start doing things that get the costs under control, and we know how to do it.

ZAKARIA: How? What would we do?

SHULTZ: The same way we do - you do it the way we do it in every other industry. Why is it that in computers the quality goes up and the price goes down all the time? (INAUDIBLE)? Why is it in other industries the same thing happens? It's because you have an empowered consumer.

When you have an empowered consumer, when the consumer has resources and there's a reasonably competitive market and reasonable information, costs come down and quality goes up. We've got to get back the consumer in the game.

ZAKARIA: But, Mr. Secretary, even if you got all the things you're describing, David Stockman, who was the budget director for Ronald Reagan, says you need to do all the things you described. But he said - he says, still, if you look at the budget deficits and you look at the projected budget deficits, particularly once the baby boomers really start retiring, you're going to have to raise revenue. There is simply no way - the math doesn't work without raising revenue.

And your proposal number one effectively locks in the - the Bush tax cuts, which means that you lose about $700 billion to $800 billion of revenue over the next 10 years. How would you make the math add up?

SHULTZ: Well, I don't agree with your math. That is, I think the way to produce revenue right now is to create some certainty about tax rates and leave the incentives there and have the economy expand. An expanding economy will - is the best way there is to generate revenue. So that's the way to start.

Then I think you need to look at the tax system, and everybody agrees that it badly needs reform. The corporate tax rate is punitive, too much, too much, too high. There are all kinds of gimmicks in the tax code that need to be taken out, and lots of other things can be done. There are many proposals for it.

And so, a serious effort needs to be made to do a - a kind of revision sort of like we did in 1986 in the Reagan administration. Incidentally, that massive tax reform was passed on a bipartisan basis. Lots of Democrats as well as Republicans voted for it.

ZAKARIA: Well, let's talk about that, because any kind of massive overhaul of any of these systems - social security, health care, particularly the tax structure, which, of course, is 16,000 pages, which is mostly 16,000 pages of - of giveaways to various special interests - is going to have to be done on a bipartisan basis. You give up your special interest in return for mine.

It seems as though anyone who tries to come forward with a compromise is immediately attacked on by the flank - each flank of his or her party. How do you change that?

SHULTZ: I - I don't know. I've been away from Washington for 20 years now, and what I read is not comforting.

But I remember, when we came into office in the Reagan administration, we had a terrible situation on our hands, inflation in the double digits and the Soviet Union running wild and so on and so on. And Jimmy Carter had called the situation "malaise" and people talked about how it was ungovernable. It didn't turn out that way.

And we can change things around, and I think people can be appealed to. People are saying what's the message of the election? And I'm sure there are lots of messages. But I think one of the messages must be Washington isn't working, and, for goodness' sakes, will you guys please get together and try to accomplish something sensible?

So maybe that message can be brought to bear and something sensible can come out here.

ZAKARIA: But, again, let me ask you, in one of your - in your "Wall Street Journal" op-ed, I think you - you mentioned that there was a period of spending restraint in - in American government, which was, roughly speaking, the mid-1980s through 2001. And you attributed it to stronger growth, which is absolutely true.

But the deficits came down after having doubled initially under Reagan because George Bush Sr. and then Bill Clinton also raised taxes. And what I'm wondering is if you take taxes off the table, will you ever be able to get the deficits down?

SHULTZ: I don't say take taxes off the table forever. I said first, have a tax regime that people know is there for a while, and have it be one that creates incentives, and get the economy moving.

In the cases that you mentioned, the economy was moving, and so these were changes that had to do with expanding economy, as healthy economy. So the first task is to get economic growth going, and you don't do that by raising taxes.

ZAKARIA: We're going to come back, and, when we come back, we are going to talk to George Shultz about the world - about China, about what's going on in Asia, about the challenges of nuclear proliferation, terrorism, Iran. All when we come back with George Shultz.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ZAKARIA: And we are back with George Shultz, the former budget director, Secretary of Labor, Secretary of Treasury, Secretary of State. And we're now going to focus a little bit more on his last job as Secretary of State for President Reagan and his insights that draw from that.

Secretary Shultz, how would you advise the Obama administration to handle this - this rise of Asia? I mean, obviously, they're going there - he's going there, he's paying a lot of attention to it. But, beyond that, what would be - what would be the kind of advice you would give?

SHULTZ: Well, first of all, I think there is a thing that you do in diplomacy that's not really recognized enough, and I do think the Obama administration is trying to do it. Namely, it's what I call gardening.

If you plant a garden and you go away for six months and you come back, what have you got? Weeds. And you can't get them out without getting all the flowers and the vegetables or whatever you planted there out.

Same thing is true in diplomacy. If all you do is go to people when there's some sort of a crisis, well, your garden is full of weeds. So you've got to have, particularly with major countries, some sort of process of gardening, of going there, talking, sorting out issues, having - setting up some kind of an agenda, working through the agenda, doing staff work, and then when something comes up that's a big problem, you've laid the groundwork of understanding and some ability to talk in reasonably candid terms.

ZAKARIA: Would you talk to Iran even though you would naturally present a very tough series of demands? Would you try to initiate some kind of dialogue?

SHULTZ: I certainly would be willing to talk to Iran, but I'd want to do it more on my agenda, not their agenda. And I would be making no bones about my opinion of what they're doing.

It isn't just their nuclear program, but look at how they are governing their people. Here, they have all these riches. They have talented people, and their most talented scientists and engineers are working on nuclear weapons instead of doing things that can be helpful to people. And I'd be drumming that in on them and saying that visibly and hard, so they know exactly where we stand, and we'd be trying to let the people of Iran know where we stand. Just as when we were dealing with the Soviet Union you remember Ronald Reagan called it an evil empire.

(BEGIN VIDEO CLIP)

RONALD REAGAN, FORMER PRESIDENT OF THE UNITED STATES: ... forces of an evil empire -

(END VIDEO CLIP)

SHULTZ: But when I went to Moscow, I always met with dissidents. We had to stay there (ph) in our embassy, and we made a point of recognizing their problems and saying what we thought. So - and we had an agenda, which we brought to the fore.

So that's the way to go about it, but certainly talk.

ZAKARIA: What would you do about the Israeli/Palestinian peace process? One of the things that - when President Reagan was in office, you guys were pretty tough on the Israelis over the invasion of Lebanon.

Do you think that we should be pressing Israel more on settlements? Do you think we should be trying to present a settlement plan that, you know, a version of Camp David, the Clinton plan?

SHULTZ: Well, they - it's one of those situations where the nature of the settlement is fairly well-known, but you can't get there. So how do you do it?

I think it's a mistake to precipitate negotiations by - and saying we're going to get this job done by the end of the year or something like that. It's not that kind of a problem.

This is something to nourish and let it take hold more and more. And then - so you're building something from the bottom up rather than negotiating something and trying to impose it from the top down.

So I'd be putting a lot of my emphasis on seeing to it that that process continues.

ZAKARIA: How would you handle the rise of China? And probably the signal (ph) geopolitical fact of the world we live in has been the dramatic rise of China economically, and now, increasingly, politically. What would you tell Obama about how to handle this rise?

SHULTZ: The first thing that I would do is get our own house in order. We're out of control. And our spending, this most recent move by the Federal Reserve has set off alarm bells all over the world, and people feel that we're a country that doesn't have our house in order.

So the first thing we need to do, in negotiating with China or anybody else, is get our own house in order. Get ourselves under control, where we're financing our own investment and we have reasonable balance in trade, and we're getting control of our deficits and so forth.

Then we have a base from which to move. I think that the way to proceed is to engage the Chinese leadership and, as Secretary of State, say to my counterpart, you put on the agenda anything you want to put, and I'll put anything I want to put. And let's organize it into some sort of a - a reasonable set of things that we're going to work on, have our staffs engage, and work through this agenda carefully, thoroughly, continuously. It's a special kind of gardening.

And, of course, we need to encourage heads of state meetings. The meeting of Hu Jintao coming to Washington, I think in late January, is a very important meeting. It needs to be set up carefully. It needs to be treated with great respect, courteously, and - and that's the way you make progress.

ZAKARIA: All right. And, finally, Mr. Secretary, I have to say I'm - I'm going to find out whatever it is you eat, because I'd like to be as alert and engaged as you are at 90.

SHULTZ: Well, tell people to read this book because it's - the theme of the book is ideas matter. And if you have ideas and you act on the basis of them, you have a compass. And if you don't have ideas, you're going to just flounder around.

So start with ideas. That's why I've always been so lucky to be affiliated with strong universities throughout my adult life.

ZAKARIA: Secretary Shultz, thank you very much. It's been a pleasure and an honor.

(END VIDEOTAPE)

ZAKARIA: Coming up, a model for innovation that the United States can follow, and it comes out of a city of 5 million people. A city state of 5 million leading the way, when we come back.

(COMMERCIAL BREAK)

ZAKARIA: We're back with a special edition of GPS, coming to you from Hong Kong this week.

And now for our "What in the World" segment. America is the innovation capital of the world, the home to the best new research technologies, scientists and companies, and the only way it will stay vibrant as an economy and a society is if it continues to lead the world in innovation. Unfortunately, it is increasingly evident that we're not as securely at the top as we once were. It's partly that we're not as focused as we should be on science and technology, but it's also that others are joining in the game, learning our tricks, and catching up.

A study last year from the Boston Consulting Group and the National Association of Manufacturers found that the United States ranked eighth in the world in innovation. The top-ranked country is actually a city - city-state, one with a population of just over 5 million people. It's Singapore. And I stopped there this week to find out the secrets of their success.

(BEGIN VIDEOTAPE)

ZAKARIA: Hi there.

UNIDENTIFIED FEMALE: Hi. Welcome to my house. I hope you're enjoying your visit so far.

ZAKARIA (voice-over): That's a computer-generated avatar greeting me, at a place called FusionWorld. It's where Singapore's Agency for Science, Technology, and Research shows off its latest innovations, 2,400 scientists in a variety of fields, all working on research projects with massive government funding.

Take a look at this TV of the future that you can control with hand gestures, no remote. Look at this smart billboard that can figure out your gender and can target advertisements accordingly. When a woman walks in front of it, she's shown a watch for women. But when I walk in front of it, the sensors read my face and throw up an ad for a man's watch.

From modern mad men to medicine, this next one could save your life. ASTR scientist Lee Kyung Moon (ph) helped me understand it.

ZAKARIA (on camera): So here we have the hospital bed of the future. This is called a Smart Bed.

UNIDENTIFIED MALE: Right.

ZAKARIA: Why?

UNIDENTIFIED MALE: Well, it has two layers of sensors. One layer detects the sleeping pattern, the pressure of the body, and the other layer detects breathing rate.

ZAKARIA (voice-over): If the patient's body stops moving or the patient stops breathing, an alarm goes off to alert doctors and nurses.

ZAKARIA (on camera): But you don't have to be hooked up to anything?

UNIDENTIFIED MALE: No. It's totally noninvasive.

(END VIDEOTAPE)

ZAKARIA: For this next one, the patient did have to be hooked up, and the patient was me.

(BEGIN VIDEOTAPE)

ZAKARIA: So what do we have here? This looks like a video game.

UNIDENTIFIED MALE: This is our award-winning brain computer interface technology.

ZAKARIA (voice-over): Well, it is all that, but it is also a video game.

(on camera): This is tough. ZAKARIA (voice-over): I am controlling the blue car, guiding it around the track with my brain.

UNIDENTIFIED MALE: The game is a way of encouraging the patient to concentrate more. The harder he concentrates, the faster the car will move.

ZAKARIA: I had to train myself to concentrate really hard. But when I did, it worked. I was zooming around the track like Mario Andretti. Well, maybe like Super Mario.

Now, what I was doing was just fun and games, but this invention has many very serious real-world applications - helping rehabilitate stroke victims, helping the severely paralyzed communicate with the outside world, and helping kids with attention deficit disorder. Rather than using drugs to deal with the symptoms of ADD, this game tries to get at the root cause and train children to focus and concentrate.

So what is it that makes Singapore so good at innovation? Well, it needed to do something to move up the value chain. Around 2000, Singapore looked around and realized that it had to do something different to get ahead in the new world. Its wages were high. It couldn't compete with China in basic manufacturing anymore, so the government decided to pour money into innovation and R&D.

Between 2000 and 2016, $30 billion of government money will have gone to innovation. Remember, Singapore has just over five million residents, so how much should the United States spend to stay ahead in this race? Well, I've argued much more than in the past. It's a new world with many new nations competing. My own number is about $700 billion, which is about what we spend on the Defense Department every year.

And we will be right back.

(BEGIN VIDEO CLIP)

SUHASINI HAIDAR, ANCHOR, CNN-IBN: It got very heated in the newsrooms. It got very heated in the studio discussions as well as to people I spoke to on the street who said, well, you know, he may be the president of the United States, but we are expecting a little more from him here.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

ZAKARIA: President Obama has spent the last week in Asia. It's an important trip to the emerging center of global economics and politics. Where once the crucial summits and global affairs were held in Europe or between Washington and Moscow, now they're all in Asia.

The debates within Asia between the U.S. and China on currency, between China and Japan on the Senkaku Islands, and increasingly between China and the rest of Asia will spill over and affect the whole world.

We wanted to take the pulse of the nations that Mr. Obama visited. So we brought together a keen observer from each of the president's destinations. Suhasini Haidar is the deputy foreign editor and a primetime anchor for CNN-IBN in Delhi. Victor Cha is the Korea chair for the Center for International and Strategic Studies and a professor at Georgetown University. Jason Tedjasukmana, is based on Jakarta, Indonesia for Time Magazine. And Yoshihisa Komori is the Washington-based editor-at-large at Sankei Shimbun, one of Japan's largest daily newspapers.

So, Suhasini, let me start with you, because Obama began with India. There were great expectations. Obama in a sense had an almost unmanageable task. He was following the president who had given India everything it had wanted. It had ended what (INAUDIBLE) called the nuclear apartheid of India by bringing India into - effectively into the nuclear club. Was Obama able to - to deliver?

HAIDAR: Well, I think, Fareed, what President Obama was able to do was something we've seen him do before actually is to keep the expectations really low before he landed in India. He gave an interview, in fact, to a news agency where he really said everything that India had wanted, whether it was sort of support at the U.N. Security Council for a permanent seat, whether it was the lifting of curbs on various Indian entities, taking them off the entities list for high-tech exports.

He said everything was very complicated. Those were the words he used. And those were what he delivered on by the end of his visit in New Delhi. And as a result, as a result of keeping those expectations low and then delivering high, I think he was able to go away with a - with a very, very strong impact made in those three days, also going away with a real feel-good factor.

ZAKARIA: Did people react very strongly to the - to Obama's decision to publicly for the first time have the United States support India's quest to be a permanent member of the U.N. Security Council?

HAIDAR: That announcement of support on the U.N. Security Council was certainly hitting the right notes. But remember it came at the end of his trip and there was a lot of public disappointment. Why is he not pushing harder on Pakistan? Why isn't he talking about terror that comes from Pakistan? Remember, that really continues to be a hot-button issue. That's not going away.

It got very heated in the newsrooms. It got very heated in studio discussions as well as with people I spoke to on the street who said, well, you know, he may be the president of the United States, but we are expecting a little more from him here.

ZAKARIA: Jason, the symbolism of his trip to Indonesia couldn't be matched. I mean, there's no other country where he'll ever be able to have that kind of connection. He spent four years there.

The reports we get are that it was a huge success. Did it feel like that on the ground? JASON TEDJASUKMANA, TIME MAGAZINE: Oh, completely. I mean, it was definitely a homerun. The welcome he got here was quite surprising. I was actually impressed myself because you didn't see too many demonstrations on the streets. There were groups that were, you know, determined to go out there and cause some kind of disturbances, but they were pretty small.

And everybody - the minute that he touched down was almost like a rock star arriving to play a huge gig in town. I think that just the fact of him arriving after having canceled three times before was just enough. That in itself was a victory for the president. After that, it was all good.

He won over everybody. Even certain ministers who probably have mixed feelings about the Indonesians' relationship with the U.S. were falling over themselves to greet the president and the first lady. It was amazing.

But overall, the fact that so many groups and Muslim students primarily who went to see him speak at his big speech at the University of Indonesia were thrilled to see him. There was, you know, a type of excitement that you would only see maybe if U2 came over here. They're all - you know, and it's increasing everyone's awareness of the potential of America.

ZAKARIA: OK. We will be right back with our guests from all four countries that President Obama just visited. We're going to - we're going to do South Korea, Japan, but we're also going to talk about how the rise of China may have rattled all four of these Asian countries. Right after this.

(COMMERCIAL BREAK)

JOE JOHNS, CNN CORRESPONDENT: I'm Joe Johns. And here are today's top stories.

President Obama is heading back to the United States after a 10- day trip to Asia. His final stop was Japan where he met with Russian President Dmitry Medvedev at the Asia Pacific Economic Conference.

Myanmar's newly freed democracy activist Aung San Suu Kyi addressed supporters today. The Nobel Peace Prize winner said she is for national reconciliation and the rule of law. Myanmar's military junta freed her after 15 years of house arrest yesterday.

Israeli Prime Minister Benjamin Netanyahu met with cabinet members today about a U.S. proposal to free settlement construction in the West Bank for 90 days. The proposal could be a difficult sell for conservative members of Israel's coalition government.

Those are your top stories. Up next, much more FAREED ZAKARIA: GPS, then "RELIABLE SOURCES" at the top of the hour.

(COMMERCIAL BREAK)

ZAKARIA: And we are back with Suhasini Haidar in New Delhi, Victor Cha in Washington, Jason Tedjasukmana in Jakarta, and Yoshihisa Komori in Washington.

Victor, let me ask you about South Korea. I was there two weeks ago and I noticed that for the first time I could not find a South Korean politician who was anti-American. The left in South Korea, as you well know, has tended to be quite anti-American for historical reasons they, you know, dissidents against a right-wing dictatorship that the United States supported. No more.

There is a rising sense that China is - you know, that China is rising in Asia and that it's very important that South Korea stay connected to America. That was my impression, you know, on the basis of a very brief trip. Tell me whether you agree, disagree. What's going on?

VICTOR CHA, FORMER WHITE HOUSE DIRECTOR OF ASIAN AFFAIRS: I think that on the one hand Koreans know they have a big neighbor in China that they need to live with. On the other hand, they understand in terms of political values they're connected with the United States. In terms of the alliance, they're connected with the United States.

And also in terms of the friendship that was - has been developed between the two presidents, President Lee and President Obama, it's something really special in the history of the U.S./Korea relationship. We really haven't seen this sort of personal chemistry between the two leaders.

And so these three things have really sort of changed the political discussion about the United States in Korea.

In addition to this, there was a very specific incident that took place, the sinking of a South Korean naval vessel by a North Korean submarine last March, in which the Chinese from a South Korean perspective behaved in a way that was way too one-sided, way too supportive of the North Koreans rather than the South Koreans. And for this reason, I think there's also been a change in the spectrum in terms of the way South Koreans, both conservative and progressive, view China.

ZAKARIA: Komori of Sankei (ph), the big incident, of course that has taken place in the - in the seas in Asia recently was the - the conflict over the Senkaku Islands. Very briefly, a Chinese trawler went fishing in waters that are disputed. It appears that the Chinese boat may have rammed into a Japanese Coast Guard vessel. The captain was arrested.

From that spiraled a diplomatic incident in which the Chinese were very tough and seemed to have startled the entire Japanese establishment. Is it your sense that Japan is rethinking its basic security policy in Asia now?

YOSHIHISA KOMORI, EDITOR-AT-LARGE, SANKEI SHIMBUN: I think it's really fair and accurate to say that Japan started rethinking its own foreign policy, it's own security policy in particular in the wake of the incident over at Senkaku Islands.

They now also revealed by the leak of the videotapes that was clearly taken by some members of the Japanese Coast Guard that's on board that's showing - that showing the actual scene, the Chinese fishing boat, coming straight ahead into the direction of the Japanese Coast Guard ship and ramming it twice.

It's a number-one news for the past two - three days, overshadowing and paling the upcoming of this president, Mr. Obama and opening of the APEC meeting, which will be held in Yokohama City in Tokyo.

So to answer your question, yes, Japanese public is very uneasy and upset about what they see as an unreasonable Chinese behavior, and that that is resulting in the government's rethinking of its own stand towards China.

ZAKARIA: Suhasini, how did the Senkaku Islands business play in India? Did Obama's trip play out in any sense as an anti - as an insurance policy against a rising China?

HAIDAR: There's no question that China was the elephant in the room when Prime Minister Manmohan Singh and President Obama spoke to each other. The two of them significantly came out with amongst other agreements a decision to continue a consultative process, an initiative they said on East Asia, that the two countries would continue to meet on East Asian affairs.

That's certainly something that is directed in a sense at China. The two countries also coming together on projects like in Africa, obviously, another way of countering Chinese influence.

ZAKARIA: Victor, sum this all up for us. You are a student of strategy, a student of geopolitics. You were George Bush's adviser in the White House on East Asian affairs, particularly Korean affairs. How is this going to play out? You have this new dynamic where Asian countries are concerned about China, and yet China is the biggest economy in the region. How will they play the United States and China simultaneously?

CHA: Well, a couple of things, Fareed. I think in terms of the United States, as many of the commentators said, you know, these trips are trips in which there's a lot of optics and there's a lot of messaging that takes place.

But in the end, every country wants a deliverable. And if the United States does not provide the deliverables, there will be continued concerns about how present the United States will remain in Asia as a major power.

But I think the broader message here for the region is, you know, there is constant concern that the United States always at some point will disengage from Asia, because of its own domestic issues, because of two wars that are taking place in other parts of the world, the United States is a security partner who's always present.

But as you - as you know, I mean, being a great power is not just about one thing that a great power can do. It's about security, but it's also about economics and it's about providing collective goods. And right now, I think there's some concern as a result of this trip, although I think it was a great trip in terms of optics, I think there's some concern about whether the United States is still going to play in Asia.

ZAKARIA: And whether it has the capacity and the domestic constituency to fulfill the role that increasingly Asian countries are looking to it to fulfill.

We're going to have to close on that. Thank you very much. Suhasini Haidar in New Delhi, Victor Cha, Jason Tedjasukmana and Yoshihisa Komori.

Back in a moment.

(COMMERCIAL BREAK)

ZAKARIA: The G-20 just met in Seoul. And our "GPS Challenge Question" this week is, how many nations are members of the G-20? Is it A) 19; B) 20; C) 21; D) 22. Stay tuned. We'll tell you the correct answer.

Make sure you go to CNN.com/GPS for ten more challenging questions. And while you're there, don't forget to check out our podcast. You can also subscribe to it at iTunes. That way you'll never miss a show and it is, of course, free.

Our "Book of the Week" stays with our Asia theme. It's Raghav Bahl's "Super Power" the Amazing Race between China's hare and India's tortoise. Bahl is one of India's most successful entrepreneurs and he's written a fascinating study of these rising Asian giants. What has the potential to bring each of them to greatness, what could hold each of them back from reaching that potential? It's a fascinating look by an Asian. Most of what we read about Asia tends to be written by westerners, but this was written from within Asia.

Now, for our "Last Look" at the president's trip to Asia. The itinerary took him back to Indonesia, his childhood home, where he hadn't set foot in almost 20 years. He reminisced in a press conference.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: When I first came here it was in 1967, and people were on bejaks (ph) or bicycle rickshaw thing. And, you know, now as president I can't even see any traffic because they block off all the streets.

(END VIDEO CLIP)

ZAKARIA: Mr. Obama, don't get nostalgic about traffic. Here's President Obama zooming through the cleared streets of Jakarta this week, and here's what everyday traffic looks like if you're not the president.

It's been said that Jakarta has the worse traffic in Asia, and on a continent that had an 11-day traffic jam earlier this year, that is saying a lot. Traffic snarls in Jakarta actually are a huge drag on its economy. It's one of those problems that will need to get solved for Indonesia to keep growing, so let's not get sentimental about it.

For this week's "GPS Challenge" question, we asked you how many nations are members of the G-20. The correct answer to our Challenge question was A, 19. The 20th member is the European Union, which is not a nation.

Go to our website for more challenging questions.

Thanks to all of you for being part of my program this week. I will see you next week back in New York. Stay tuned for "RELIABLE SOURCES".