CEO Speaker Series With Mathias Döpfner

Mathias Döpfner discusses global trade, political polarization, the role of media in foreign policy, and lessons learned as chairman and CEO of Axel Springer SE, a multinational media company and owner of U.S. media brands including Politico and Business Insider.

The CEO Speaker Series is a unique forum for leading global CEOs to share their insights on issues at the center of commerce and foreign policy, and to discuss the changing role of business globally.

BESCHLOSS: Let me welcome you all today to the Council on Foreign Relations CEO Speaker Series. We have a great speaker today: Mathias Döpfner, chairman and CEO of Axel Springer. And I’m Afsaneh Mashayekhi Beschloss, founder and CEO of RockCreek, and a member of the Council’s Board of Directors, and will be presiding over today’s discussion.

Mathias, as you know, his bio is in the material that you have, so he needs very little introduction to this group and to everyone in Washington in particular, I should say. So the only thing I think that I should mention is that for the last four decades he’s been a journalist, has been a digital media innovator, a business leader, and he has chronicled and helped shape social change in Europe and globally through a lot of both business but also the books I was learning that he’s written, not just in what we’re going to discuss today but, hopefully, another time when we can talk to him about his books on music and Brussels.

So with the new book, The Trade Trap, he turns his experience and deep thinking to a radical new vision, value-based free trade and global leadership in this particular times that we’re living through, and as my husband, Michael Beschloss, likes to say, go buy the book but buy at least ten copies to give to your best friends. It’s a fascinating read and I’m excited to discuss it today—with you today.

So let me just first ask how did you get to write the book and what sparked the idea to do it at this particular time?

DÖPFNER: Well, I love democracy and because I love democracy I’m worried about democracy. I’m worried about the prospects of the free and open society model, about freedom.

Freedom has been always the most important value for me and basically the thing that I care most about, and first time that I really had the idea to write such a book was during the annexation of Crimea. And the deeply-rooted worry that I had long before is that democracy and the free society model is not only threatened from within by weak centrist leaders or by rising populists and autocratic strongmen, but also by a trade policy and a business policy that I found more and more dangerous if it leads to dependency.

And we have seen that with Russia and with energy policy towards Russia, particularly from a European perspective. We have seen the consequences and to certain degree that Europe and Germany has strengthened the Putin that we have to deal with today.

I’m deeply convinced that the next and way more important chapter is going to be China. If Taiwan is really taken over we have an escalating conflict and the degree of dependency that we have in Europe but also in other parts of the world really worries me.

So I thought it is time to come up with a new proposal that is not based on prohibitions but more based on incentives and so far democracies still have the upper hand—they are 70 percent of world GDP—and if we could create an incentive to strengthen that part of world economy that would be, perhaps, a good idea.

So I came up with a concrete proposal to say let’s build a new trade alliance of democracies, which would mean we have to cease operations of the dysfunctional WTO and have a more informal closer to the old GATT idea alliance of democracies based on three criteria for membership. One is the acceptance of the rule of law, the acceptance of human rights, and the acceptance of CO2 targets.

Everybody who accepts these three criteria can become a member and have tariff-free trade. Those who do not comply can continue to do trade based on high tariffs, and I think that would, like a good tax reform, cause some short-term damages but mid-term and long term would strengthen democratic economies and strengthen democracy, and would avoid that we are undermined by autocracies that in the first place only create business dependency but in the second place also will have political influence.

I think it is naïve to think that it stops at economic dominance. It will also mean that more and more democracies will have to live up to the standards of autocratic systems and the kind of surveillance capitalism that I think should not be the model for our open society future.

BESCHLOSS: When you just started talking and, of course, when you read the book you see that the—you know, you start with almost like a love letter to democracy—

DÖPFNER: Right.

BESCHLOSS: —and you just referred to that. So was your upbringing in West Germany, given the timing of that, very influential to make this topic something that was brewing for a very long time?

DÖPFNER: Of course the German history plays a role and there is one element. That is the German reunification in ’89, the fall of the Berlin Wall, and the moment when freedom prevailed, and we all know that that led to this famous book of Fukuyama—

BESCHLOSS: Yes. Of course.

DÖPFNER: —a kind of end of history and the free society model will prevail. We know from today’s perspective that that is not the case, that democracy is in decline.

But for me personally I think even more important was the Nazi period of German history, and my personal learnings about the Holocaust and what really happens if freedom—if rule of law, if human rights are absent, and that created for me an intrinsic motivation, in a way, for my whole journalistic life, and history doesn’t repeat but history rhymes and to see certain developments in other countries that I found scary.

Also, as a CEO of a company who did business in Russia, who did business in Turkey and in other countries at the limit on the edge between democracies, populists, autocratic dictatorships, societies. So I think that was also on a very personal level—memories, experiences, concrete learnings out of that—that brought me to the conclusion I got to write that book in order to stimulate a discussion that we need.

BESCHLOSS: You met Putin at the—

DÖPFNER: Right. Yeah.

BESCHLOSS: —at one very interesting time in history and you—I think your observation was that he was no longer the leader of a superpower. He was the leader of a kind of a middling power, which was very upsetting. And when you saw him at that point did you see—so did you sort of see the dots to where we are today? Or now that you look back do you see how that might have impacted his behavior in recent times?

DÖPFNER: The meeting took place in 2005, shortly after one of our editors, Paul Klebnikov, the editor of Forbes Russia, which we published, got shot in front of the newsroom and I got that invitation from the Kremlin to meet Putin and getting courage to continue to do business in Russia.

Of course, by then it was a different Putin. He was still considered to be the kind of new democratic leader of Russia who is shaping a new future for more open society in Russia. But you could already feel by then that there was this inferiority complex of a former superpower who was basically complaining about we have to be treated more respectfully by the United States. We are not a colony. We have our own pride.

So you could sense this intention to rebuild a stronger, bigger Russia and you could feel this kind of somewhat scary energy that was in the sub tones. I would not say that you could predict everything that has happened but you could feel this ambition and you could feel kind of hidden aggression that I found scary, and if you from then on followed the actions including the Georgian war in 2008 I think you should have not been too surprised and I was surprised to see shortly before the invasion happened at the Munich Security Conference that almost all Europeans agreed that this is never going to happen. This is just a tactical move but Putin is never going to invade Ukraine. This he would not dare. This he would not do.

The Americans? Ninety percent were convinced he’s going to do it, and so to see that difference between Europeans and Americans also in a way stimulated me to say, well, this is now really the point to write that book.

It is a European reaching out to an American audience in order to reestablish, to revive, a transatlantic alliance that is not only important for security policy—and, fortunately, during that war NATO has been strengthened more than ever—but it’s also important in order to reshape a new trade concept and policy.

BESCHLOSS: So you talked about abolishing WTO, ideally—

DÖPFNER: Yes.

BESCHLOSS: —and to go back to GATT or to create sort of a new entity. When you look at why WTO did not succeed to what extent was it because we hoped—you know, as an economist, we—you know, I taught theory of comparative advantage and I think it has not worked, obviously.

And when you look at what you’ve studied during this time and in the book what actually went wrong with what—the way we were thinking as economists, as policymakers, as decision makers on trade?

DÖPFNER: It’s interesting that it seems to be a signature of our times that a lot of these multilateral international institutions are in bad shape. That is true for the World Health Organization during and after the pandemic.

That is true for the U.N., not only if we look who is participating or not participating but also if we look how they were dealing with defending nondemocratic moves, and I think it is most obvious and most acute with regard to the WTO, which I think made its biggest mistake in recent history by accepting China after fifteen years of negotiation in December 2001 as a full member based on that idea that China is a developing country and with that enjoys exemptions and a lot of privileges that other members would not enjoy.

The fact that China is meanwhile the second biggest economy in the world and, despite recent kind of corrections and cyclicalities on the way, to become the biggest economy in the world makes it an even more absurd situation and that has led to a totally asymmetric trade policy which helped China to grow from, roughly, 4 percent contribution to world GDP to more than 18 percent while the United States went down from 32 (percent) to 24 (percent) and also the EU went down significantly.

So it’s very clear who is the beneficiary of that asymmetric policy. There is no reciprocity really given and I think this is probably the fundamental conceptual mistake of WTO. On top of that, too much bureaucracy, too big, so big that it can only fail, we could say.

So, in a way, I think it is really time to rethink it and that has been also amplified over several American administrations that this seems to be not the institution of the future to solve a world trade policy concept and its execution.

BESCHLOSS: So in real life it has been made very weak. Right now the U.S. is a member, but you can’t really make any decisions. It’s become a completely ineffectual body. Would you abolish-abolish, as you suggest, or would there be a hope to sort of start from scratch and make it based on some principles closer to what you’re talking about?

DÖPFNER: Yeah. I’m not a policymaker and my whole book is more presenting an idea than a recipe. But from my experience it just seems to be more likely that a new really fresh start with a way less bureaucratic form of organization like the old GATT, which was a pretty functional—

BESCHLOSS: Yeah. Absolutely.

DÖPFNER: —concept for many, many years, it’s not only more likely but also more successful. So yes, I would advocate, rather, that the WTO ceases operations and we start afresh.

BESCHLOSS: So it’s very interesting. As I was reading your book we had the G-20 proposal for the India-Middle East-Europe corridor being built and then you had the BRICS conference just before that, and if you just looked at the visuals of the world leaders, you know, sort of waving it looked very sort of similar to—you know, as you talk about the freedom trade alliance the anti-freedom trade alliance was getting built.

DÖPFNER: Hundred percent.

BESCHLOSS: And so as you’re looking at this world where you have—where there is maybe a chance—I think better chance than ever for people to follow some of the, you know, recipe that you have in the book what is the concern about the other side? Because they have learned also how the world works and, like you said, China is already the size it is, and the Middle East is playing an interesting game on both sides. So how do you see that?

DÖPFNER: Well, a hundred percent. I mean, the ideal scenario is that by forming this alliance, by creating so many incentives to really join that alliance and benefit from that even autocracies or dictatorships of today from China to Russia to Islamist fundamentalist regimes will decide over time that more freedom, more human rights, more predictability of rule of law provides a great deal more prosperity for its people and with that more stability for the political leadership.

So actually it’s a good deal. But that deal is only kind of seductive and attractive as long as this democratic alliance is big enough. That’s why we have to really base it on basic principles and not on perfect executions.

We have to build a critical mass of members, and if we start with this transatlantic basis of the U.S. and the EU and then having, of course, Canada, Australia, Japan, some countries in Africa and Latin America, join the alliance one of the most important questions will be India, India with 1.4 billion people on the edge somehow between democracy, also—

BESCHLOSS: Not alike.

DÖPFNER: —autocratic elements that are, unfortunately, getting stronger. But I think they have either the option to try to become a kind of big Switzerland with 1.4 billion inhabitants or to take sides, and I think there is an opportunity if we make a better offer than this kind of BRIC alliance that the upper hand that democracies have is so compelling that one after the other is joining the alliance and that then would be the ideal outcome.

Now, I’m not naïve. If that is not happening I still think that we have a strong—I’d say 70 percent plus—of the world economy being in that alliance based on values and principles. I think it will be good for globalization because what is the alternative? That America decouples unilaterally? I think that is definitely not going to solve the China question and it is also going to weaken the American economy.

If the EU thinks that they can go in a third direction and can muddle through and that they can please the Americans and the Chinese this is a total naïve mistake which will make sure that the EU is going to end up as an annex of Eurasia and will be a kind of theme park where you can visit European history but no value creation is happening.

So I think all unilateral decisions and scenarios will weaken the democracies. If we stick together on that transatlantic basis and then invite more and more, even if we don’t get to the kind of full global scope of that I think we will still be better off and we’ll have more international cooperation and less deglobalization.

BESCHLOSS: And China, obviously, is the big elephant in the room.

DÖPFNER: The very big one.

BESCHLOSS: You know, you—and as you look forward to what is going on in China—and it’s kind of interesting because, again, I was reading your book—China sort of played around, not with democracy the way you’ve written about it but sort of their version of democracy and that was their fastest growth area when they were more open, and then with President Xi, of course, you know, you had the downturn.

What is sort of the risks coming from China regardless of what we’re—you know, what you’re prescribing with Taiwan, with their use of AI and the way they’re building their military? What are your concerns?

DÖPFNER: Well, on many levels there are challenges and issues. China has changed over the decades and when Deng Xiaoping implemented that policy of opening China and opening its economy I think it was a real conceptual change and Henry Kissinger was right to support that and encourage people to go into that direction.

But then China has changed again and under Xi China became less open, more authoritarian and, of course, still this economic ambition remained intact and this very efficient form of a state-led communist super capitalism that China has implemented is, of course, way faster and way more efficient.

I mean, if people are debating in America and Europe if you want to build a new airport it takes years if not decades because people are protesting against it, either you have to listen to it, you have to take it seriously. In China, it takes you three to five years because if anybody opposes the house is going to be torn down tomorrow, and if it goes beyond that people get imprisoned or even killed if they oppose government policies.

So we cannot compare that. It is not a fair competition. It’s neither a fair competition in the WTO nor is it a competition between a state-led communist super capitalism compared to a democratic value-based rules-based capitalism as we have it.

So I think we have to acknowledge these differences, and you have mentioned AI. That is, of course, the big game changer. AI is very much based on access to data and, of course, to a certain degree on regulation based on ethical standards, and whether it’s the United States or whether it’s Europe we have discussions around limitations, around ethical principles that we should not breach.

In China the only criteria is what is for the well-being of the state of China and the Communist Party is welcome. And with that, I think the combination of access to data of 1.4 billion people—there are very interesting experience going around in that context—and at the same time this lack of, yeah, ethical limitations and regulation will be a competitive advantage for China. And if we don’t find a solution for that, the superiority of China is very likely in that context, and who controls AI has a political advantage and an advantage of world dominance.

So I think that is another aspect that makes it even more acute to come up with a solution, and since we cannot forbid things in China, as I said, we have to form our alliance based on our interests in a very kind of self-confident manner and make it so attractive that in theory and, perhaps, in practice everybody can join.

BESCHLOSS: So in this scenario Taiwan would be part of the free trade alliance?

DÖPFNER: Yes, absolutely. Taiwan would be immediately part of the trade alliance and that also would send a political message. I mean, we all know what is going to happen if China is taking over Taiwan, and I have talked to very few Chinese people in the recent past who told me it’s not going to happen. The only discussion is when is it going to happen.

It’s a bit like with Ukraine, yeah, where some people are saying, no, they don’t dare to do it. China is not about military power. They just want to make money and you misread it. I’m deeply convinced that it has to happen. And the question is in which context, and what happens by then to the semiconductor dominance of China, and to which degree can that politically and economically abused, and to which degree can that then trigger a World War III. Those are the things that worry me and I think by just waiting we are not going to avoid that. We have to shape it proactively.

BESCHLOSS: And especially with specifically Taiwan in more recent weeks there’s a lot of conversations here in Washington about maybe quarantining. The word is—the word quarantine is getting used versus invasion because invasion has a lot of potential other—

DÖPFNER: Negative connotation. Yeah.

BESCHLOSS: —impact versus quarantine where you basically—Taiwan is sort of almost like a one-industry town. It has, you know, the TSMC. So how—if you sort of quarantine and then you decide who gets it and who doesn’t get it and who pays, the opposite of what you’re talking about, i.e., the Americans then have to pay a tariff to get access, and these new factories that are going up are going to take still three to five years for the reasons you just talked about and not necessarily be the same quality.

So there are those kind of risks in the marketplace, as we see. But do you think that Taiwan still should be on this side versus for the West to let Taiwan go?

DÖPFNER: I definitely do so. I think Taiwan as its constitution is today is complying to the criteria of such an alliance would ask for and I think also in a more strategic sense it would be an important signal of protection.

I mean, let’s assume that Ukraine really would have been a NATO member. Would that war have happened? I’m deeply convinced autocratic systems only understand the language of strength and not the language of diplomacy only. You can do, according to the old Kissinger rule, send troops and negotiate at the same time.

But without any sign of power you’re not going to achieve anything, and I think also in that context a sign of protection—we are an alliance—could avoid the terrible outcome.

BESCHLOSS: One of your principles is the environment and climate, obviously—

DÖPFNER: Right.

BESCHLOSS: —and you talk about in the book that CO2 emissions have gone hugely up by, like, almost 200 percent since China joined WTO.

But you also—there’s wording that you use that I really liked, if I may quote you, which says: “We ourselves contribute to the problem by outsourcing the climate sins we don’t want in our own backyards to China and elsewhere.” How are we going to deal with that?

DÖPFNER: I mean, we have climate demonstrations all around Western democracies. In some countries, they are not happening because they are simply forbidden. We have demonstrations in Manhattan. We have—yesterday we had demonstrations also in Berlin and climate activists painted the Brandenburg Gate in orange.

So we have these discussions and at the same time the big elephant in the room is completely ignored. China is at the moment 32 percent of world CO2 emissions. The entire global air traffic is 2 percent of global CO2 emissions.

How can we discuss to avoid a holiday trip to Miami and save the climate by allowing China to accelerate its CO2 emissions and quadruple its coal plant capacity—quadruple the coal plant capacity in ’22 compared to ’21 in one year? This is just double standards. And if we contribute to that ourselves by saying here we have stricter and stricter standards, and CEOs are reaching out to these climate activists and try to do better, and at the same time they are basically outsourcing large parts of their production to countries that just do not comply and laugh about it, I think that’s, to a certain degree, not very credible if not bigoted, and I think it is not a sustainable model.

BESCHLOSS: And it’s very interesting as, again, I have to tell you my own bias, which is I very much agree with your suggestion on this front. At the same time since I studied economics, which is a long time ago, this concept of externalities is there. In the U.S. especially the idea of taxing CO2 is not really viable. In Europe it’s much more viable. In parts of Asia, in fact, in Singapore and other places it’s very viable.

So how can we put this tax which—you know, as you said, if we’re going to buy t-shirts or goods or manufacturing goods from a country that has inherently created more CO2 we should be charging differently for those and putting different kinds of tariffs. I think that is such an obvious even for—the way Economics 101 gets taught should be with that basic principle.

But how do we explain that to policymakers here and actually your advice on how do we—

DÖPFNER: It’s a tough one. And again, I’m not having the solution for everything or the recipe for everything, but more a kind of starting point for a discussion and in that context I truly think that the combination of incentives for those who comply to these standards to do more business together and also to reallocate production, plus at the same time tariffs and with that you could say a fairer competition with those who do not comply, can have a positive impact, and it’s not going to be solved on day one and I think we also have to distinguish between industries that are highly strategic.

I mean, if we take the example of photovoltaic solar energy, it used to be a business that was nonexistent in China. It was basically a European or U.S. business. High investments and high subsidies in China between 2010 to 2012—I think more than 42 billion (dollars) of subsidies into that industry—and today the capacity has moved to 80 percent to China.

This is something—why do we let that happen? Why do we allow that? Why aren’t we just a bit more stricter? And if somebody is not complying at all to the standards that we agree on and wants to sell products to us then we have a tariff issue.

BESCHLOSS: Right now in Europe there’s a big conversation about electric cars as we speak in the papers.

DÖPFNER: And that shows you the EU is discussing it now—should we have special tariffs for electric cars from China. That shows me that we really need a bigger solution. We cannot always react to certain developments and say this industry or this particular product here we need a particularly high tariff. That is way too complicated, reactive.

So that’s why I would advocate a more proactive and more fundamental approach to solve the issue.

BESCHLOSS: But I think their reaction seems to be implying they’re more open to your recommendations in the book than ever.

DÖPFNER: That is true. Things are changing. When I started to think about it, it was perceived as a completely crazy and—

BESCHLOSS: Right. And today it’s like—

DÖPFNER: —absolutely unrealistic thing, and meanwhile we have in the United States this topic is probably one of the very few relatively nonpartisan topics and also in Europe the kind of sensitivity is growing, although talking about that concrete topic a negative example is the German car industry.

I’m German. So car industry is the economic backbone in Germany. VW is selling more than 40 percent of its units to China, Daimler and BMW 33 (percent), 34 percent. Over proportion of profits are generated there.

So if you talk to a German carmaker you cannot ask them to shape such a long-term concept. They have to opportunistically optimize next year’s earnings, and if there is this dependency what can they do? The naïve misconception is that they think the only question is how long we are going to continue to do business—to do business with China on that basis without understanding that the question is not when we decouple from them.

The more interesting question is when is China decoupling from us and BYD, the big Chinese car company, has sold a few months ago hundred thousand units of highly subsidized E-cars to the biggest German car rental company, which was, of course, a political gesture. Guys, we are entering your markets and it’s not how long you can deliver your product to us. Now the question is what do we do in your market and in your backyard, and I think that has to be realistically acknowledged.

BESCHLOSS: And you talk also about the CEOs who sort of talk on one side of their mouth about ESG and then, you know, do the opposite. So as you said, they have quarterly—you know, everyone has quarterly earnings that they have to meet. How do we move businesses to this sort of long-term value creation versus short-term earnings?

DÖPFNER: So, first of all, I don’t want to blame CEOs—

BESCHLOSS: No. No. It’s not a blame. It’s—

DÖPFNER: —and my colleagues because they all understand the necessities. But we can—and we are all not perfect and we have all our kind of ambivalence—ambivalent situations. But there should be limits and what I can hardly stand is to present yourself as a kind of moral lighthouse of ESG compliance and ethical standards and in some companies people get fired because they use a wrong gender pronoun and the same company is the same day outsourcing business to countries where you get sentenced to death because you are gay or a woman gets stoned because of adultery.

That is a double standard that I think cannot be accepted and will—if we continue the ESG discussions on the one hand we have to give an answer for our trade policy on the other hand because this cannot come together in a kind of sustainable or credible way.

Now, how can that be changed? I think not by moral speeches of business leaders. We need a legal framework, and since I am always more convinced about incentives than about prohibitions I thought that is, perhaps, the direction of a new thinking that may also help business leaders to comply and to be more consistent in their actions.

BESCHLOSS: So if it’s OK with you—I have a lot more questions, I have to say, but I—this is a good time to open for question and answer, and I wanted to invite our members to join our conversation if we could.

DÖPFNER: With pleasure.

BESCHLOSS: So I think we have two questions back there, but we’ll start there.

Q: Thank you. Massimo Calabresi from Time magazine. Fascinating conversation.

The conversation has been mostly focused outward. I wondered, even at the Council on Foreign Relations, if I could ask you to address the sort of internal impacts of trade. Most of the things you’re worried about internally—populism and so on—come from the reaction and the effects of trade.

If you could address a little bit more directly how you think your model will take care of what on the left is criticized as the rise of neoliberalism or on the right is the forgotten man or in the center, you know, the need for a foreign policy that works for the middle class.

DÖPFNER: If I understand your question correctly, you are asking what that does to the internal problems of society, also particularly with regard to polarization. And, honestly, I think that this idea has potential, but, unfortunately, it has not the potential to solve all the problems.

I think the polarization phenomenon, which is definitely not a U.S. phenomenon only—we see it in Europe, we see it particularly also Germany with the rise of a very aggressive right-wing populist party, we see it in France, we see it in Eastern Europe—I think is a phenomenon that has various reasons.

One of the obvious reasons is the role of social media that is amplifying and accelerating this kind of emotionalized and personalized aggression. But it has also to do with weak centrist leaderships, that more and more people think they don’t feel represented by centrist leaders, and in that context I think indirectly this idea could have also a positive impact on that because it would be a bold move to defend an open society model that is based on freedom—individual freedom, free speech—and also on this beautiful democratic strength and ability to agree to disagree.

And if that is vanishing—and I see it here and there that people have almost no ability to disagree politically or to disagree on a certain topic and nevertheless continue to speak to each other or to remain friends—I think that is a very, very worrying trend.

So the things—and that’s why I like your question very much—the things are related. If we accept that principle that societies are exploding because of polarization and also because media are taking sides and because certain bubbles lose the ability to interact with each other, then I think we are in trouble and we are destroying our open society model and democracy ourselves.

If democracies who are perceived and democratic leaders are perceived to be pretty weak and not very determined would come up with such a bold move I think that could really align a lot of people. And as we said, let’s take the issue of China and the fact that it is one of the very few nonpartisan issues in the United States.

How wonderful would it be if on an international level that would be tackled by political leaders of the center and people would get the feeling, OK, these guys are doing something; it’s worth to really lean in for that.

So indirectly it is connected, I would say.

Q: Thank you very much for a very timely conversation and book. I’d like to pick up where you left off with Massimo’s question. I’m Tomicah Tillemann with Haun Ventures.

We have a very analogous set of conditions in the digital cognitive ecosystem that we all inhabit right now, as we have in the trade ecosystem. We made a couple of bad architectural decisions a decade or so back. Those architectural decisions have led to a set of dynamics that are proving to be highly corrosive for democracy.

And so based on what you just laid out a few moments ago I’d be grateful if you could offer some guidance on what a pro-democracy digital information ecosystem might look like. Could we recontour the information landscape in ways that would be helpful to democratic values and, hopefully, enhance democracy rather than undermine it in the way the existing players are increasingly undermining our values and principles?

DÖPFNER: The shortest answer to this super important question—I would love to write my next book about that—(laughter)—is that is a competition. Competition and diversity of offerings that’s the most important thing.

If there’s too much dominance in few hands it gets out of control. That has been true for the first twenty years of platform development and we see the consequences with some of the gatekeepers that we have created or that we have allowed to be created and it is even more true for AI where we see the whole phenomenon on steroids.

That’s, by the way, why I’m a little more optimistic if it is about AI regulation because I think the obvious threat for democracy is very concrete for every politician and we have learned from the mistakes that we have made in the first wave of the digitization and we may now come up with smarter and better regulation.

The principle that intellectual property needs to be as protected as physical property I think remains the most important principle, and the second one is that there needs to be a balance between access to data and smartest usage of data but also protection of privacy and individual rights in the context of data ownership. So if data are owned by companies, it’s a problem. Data should remain the ownership of the individual. So those are kind of very basic principles, but they are already helpful to kind of describe a little bit of framework of smart regulation.

Another remark also here, the only solution can be an international one. To think that one player, let’s say, of the transatlantic duo can do it alone is just naïve. Maybe Europe and America are too small together. But one thing is for sure, a U.S. solution only or EU solution only is pointless.

So we have to form that alliance, and I’m also here a little more optimistic after these experiences where a lot of Americans looked down to Europe and said, these guys they are—instead of innovating, instead of embracing technology, they’re only regulating it. Now more and more people are realizing, well, there was a point because if it gets out of control it’s not good for us.

So maybe there is a different mindset and a different opportunity to do better this time in the context of AI regulation, and then this argument but if we do something and China doesn’t it is weakening us, sorry, is also misleading. You cannot—just because you don’t save the entire world you cannot stop doing something that you should do in your own backyard.

So my concrete call would be we have to come up in high speed with a transatlantic framework for smart and iterative AI regulation because AI progress is so fast that no politician, that no regulation scheme, can ever kind of find the concept that solves all problems.

But we have to start to learn from the mistakes that we did in the first place. I mean, that’s not an answer to your super important and complex question but at least some points, perhaps.

Q: Hi. How are you? I’m Kevin Baron and I actually work for you. Full disclosure, I’m the editorial director of Politico Live. But before this job, which I’ve had for a month, I was the executive editor of Defense One and a Pentagon reporter for about fifteen years, so I have a security-related question.

I’d like to ask you about coverage of China. You said a couple times here today that China is a nonpartisan issue. But I also see it being used very eagerly as a partisan wedge, especially in the U.S. elections—I’ve seen it in Europe as well—in a battle over what to think about China and whether if you’re a business leader if you do business with China you can still be a patriot or not.

So this fight over how to approach China, and I wonder if you see any gaps or any concerns over how Western media is covering this rise of China and the rise of awareness about China, of whether, you know, it should be demonized and used as a political tool, the effects that’s having in things like Wall Street, corporations, Hollywood, and even media, some other, you know, competitors of Politico for doing business with China, for example.

So any thoughts on that?

DÖPFNER: That’s a difficult and interesting question. In any case, the short answer is we can do better and we should do better.

The second aspect is it’s not so easy because the thing that we should do first is to send more people to China in order to have more correspondence and more reporters on the ground. But that is difficult.

I just last week spoke to a Chinese woman in Berlin and said, could you work for us as a correspondent, and she said, unfortunately, not. I cannot really write what I see. I cannot report what the reality shows.

So the limitations in media freedom in China are also limitations for our reporting and for our picture that we paint about China.

And then, perhaps, last remark, that there are always waves and there was also in the kind of media majority a fascination by the Chinese rise and the success of the economy that has for some time basically neglected the dangers and the threats that come with it and we have now to be careful that this is not going to the other extreme where it’s “the Chinese,” which is evil.

That’s, of course, absurd. I think the Chinese people are hardest working, super ambitious, super smart people and we should not hold them accountable for the wrongdoings of their government. So we have to be also careful that these whole discussions do not end up in nationalism or even in racism.

It’s not about the Chinese. It’s about a very particular aspect of autocratic Chinese government.

BESCHLOSS: You talked about incentives. I think what’s interesting is how the market is behaving right now. The largest amount of equities came out of China in the last just two months. So the marketplace is behaving faster than defense.

DÖPFNER: Right. And, by the way, I think the current developments and the downturn of China, which I think should not have been unexpected and would have been the first economy in the world that has no cyclicality, is now not a reason to lean back and say, oh, we don’t have to do anything; it’s going to be solved by its own.

No. This is the moment. We can take advantage of that. That makes the likelihood that China comes to terms with us or at least makes some concessions in order to save its own prosperity are much higher than in the middle of an upswing.

BESCHLOSS: Absolutely.

Q: Thank you. I’m Jonathan Ward, the author of China’s Vision of Victory and The Decisive Decade.

So a question for you with regard to China, once again. There are so few business leaders and CEOs that are willing to say anything publicly in the way that you have. And it’s very clear that, you know, D.C. is awash with the China discussion, with competition, with adversary, with all of this. But one can count on maybe one hand—I tried to, you can’t get there—the business leaders who’ve said something publicly.

So my question to you is, do you think that will change in the next, let’s say, two to three years? And part of why this matters I don’t think the policy community is going to get too far in this overall contest. Many of my prescriptions have been similar to yours. This is about economic power and regaining our initiative and we can’t do it with the business—without the business leaders. So curious what you’re seeing from your colleagues. Will there be a change?

DÖPFNER: So my short and direct answer is it’s not very likely that this is going to change. Too many business leaders feel that need to be very polite publicly. So we’ll illustrate that by a true anecdote.

The car company Daimler in Germany was publishing a couple of years ago—I think five years ago—an advertisement where they quoted the Dalai Lama, and the quote of the Dalai Lama was very harmless. It said, look at situations from all angles and you will become more open.

Interesting statement. But the Dalai Lama is not very popular in China, as we know. So the CEO of Daimler had to apologize for this single motive of an advertisement campaign—advertising campaign out of thousands of different initiatives and motives of the company—publicly to the Chinese government twice. Twice.

So I couldn’t believe it. And by coincidence a few weeks later I had dinner with some colleagues at the Chinese embassy in Berlin and I asked the Chinese ambassador, so did the CEO of Daimler really have to apologize for this very harmless quote of the Dalai Lama, and the ambassador smiled at me and said, well, actually he didn’t have to apologize, except if Daimler wanted to continue to sell cars in China he had to apologize. (Laughter.) And that illustrates, perhaps, a little bit why the likelihood that that is going to change is small. It’s a power game.

BESCHLOSS: We’ll go on this side.

Q: Elliott Abrams from Council on Foreign Relations.

For about a decade, more than a decade, the most admired political leader in Europe, maybe in the West, was Angela Merkel. Given the argument you make about the need to avoid dependence on dictatorships I wonder what your view of the Merkel period and the Merkel leadership is today.

DÖPFNER: A wonderful question because I really would recommend to buy the book The Trade Trap and read my chapter on Angela Merkel—(laughter)—because I’m explaining everything. But I’ll give you the short version.

Yeah, she is a good example of how centrist leaders can contribute to the creation of the problem. When Angela Merkel took office, Germany consumed 33 percent of its gas from Russia. When she left office, it was north of 60 percent.

So she has through that policy, which was accelerated by the dropout of nuclear energy, which I think was a very unnecessary if not unreasonable if not dangerous move after Fukushima, just under this emotional impression, perhaps driven by other considerations about future coalition constellations with the Greens.

But, however, driven by the dropout of nuclear energy these new contracts with Russia created or accelerated a dependency. Nord Stream 2, against the advice of U.S. experts, was, of course, a big mistake and has created that problem, and that shows you don’t need to be a populist. You don’t need to be an extremist. You can be a very centrist, a very reasonable, a very moderate leader and nevertheless can make mistakes that lead to that very unfortunate outcome.

So I don’t want to be unpatriotic here as a German in an American audience but in that book you will get some more insights about my view on Angela Merkel’s chancellorship.

Q: Thank you very much. I’m Charles Lane. I don’t work for you. I work for your competition, the Washington Post.

A question about—coming back to your big picture suggestion for this sort of free trade area of the democracies, it’s too bad Mike Froman isn’t here—

BESCHLOSS: Exactly.

Q: —because he had a lot of experience as USTR dealing with other democracies. It was often extremely difficult. I’m sure you’re well aware of the trade issues we have with Canada, just to name one country.

Have you—I mean, do you discuss that in this book? I mean, this is a very high level, very attractive idea for a new system based on a community of values. But as I’m sure you’re well aware, within that group there’s tremendous difficulty and a lot of protectionist sentiment.

So how would your proposal cope with that?

DÖPFNER: Yeah. Protectionism is a phenomenon that is widely spread and—here and there. It also exists in the United States of America. And very kind of narrow-minded interests and short-sighted interests are together with protectionism; the biggest enemy of such an idea, there is no question. I’m not naïve about it.

Nevertheless, perhaps, big challenges, big risks, and I think the risk is existential and I’m really serious about it. I think if we continue like that the risk that we lose democracy is real. Maybe that the perception how real that risk is and the learnings after the wakeup call of this terrible war that Putin has started in Ukraine and that is now putting the entire democratic world to that front to decide how determinately we are defending freedom and democracy may be a learning experience that we’ve got to do something and that these kind of protectionist and narrow-minded interests of certain industry sectors, countries, should be put aside or should have smaller importance and that the bigger cause justifies a collective move.

That is a hope. Am I saying that it’s going to happen? I hope.

Q: Hi. Marc Rotenberg, Center for AI and Digital Policy. Nice to see you in person. We’ve exchanged email over the years.

I wanted to return to the topic of the digital economy, in particular the transatlantic relation. I actually remember when Ursula von der Leyen shortly after President Biden was elected proposed a transatlantic agreement on artificial intelligence and, of course, those were early days.

But we’ve seen in the United States just over the last six months a very rapid evolution of the White House policy on AI and a meeting with CEOs and civil society, and reading Anu Bradford’s recent book Digital Empire where she talks about the EU approach and the Chinese approach and the U.S. approach she raises the prospect of increasing convergence between the U.S. and the EU around democratic values.

Now, three years ago this seemed improbable and we were just getting over the prior administration. But my question is what is your assessment today. Do you think there is greater alignment and can this be part of the solution toward the goals you’re seeking on the trade side?

DÖPFNER: Absolutely. I’ve never been so alert about the new dimension of threats to democracy in the context of AI and I’ve never been so optimistic that a true transatlantic consensus can be found and can be developed.

I heard it from American regulators. I heard it from European regulators, from politicians across the Atlantic. Everybody is aware of that situation. And this is not cricket. It’s really, really serious, and you could say the advantage is in the first wave of digital regulation it was easy to portray it as some old industries are trying to defend their dying businesses. It is about digital progress and the big platforms are created here and we are so proud.

This is over now. Everybody realizes it’s existential. If we make sure that the machines serve the human beings we are fine. We are doing better than ever. If we allow that human beings are serving the machines or that the definition of what is possible, what is not possible, is done by very few AI superpowers then that creates an imbalance that can overrule democratic institutions, can overrule governments, and can seriously destroy democracy.

That’s why I think—again, to cut it short—yes, I think this is the moment—the gold moment—for a transatlantic concept, and if we can do it for AI and digital regulation why couldn’t we do it on a broader scale also for a more international democratic trade policy.

BESCHLOSS: Back there.

Q: Uriel Epshtein, Renew Democracy Initiative. Great to see you again.

We used to—you’ve touched upon this, right—we used to think that our capitalist system could export democracy and what we’re finding, based on your Daimler story and countless others, is the exact opposite, that we’re importing authoritarianism. We’re limiting what we say in our own world. I mean, you know, we obviously have many of the same messages here.

But one of the things that I know we’ve really struggled with is thinking through what incentive structure could we possibly construct for these CEOs to compete with the markets represented by China and these other authoritarian regimes. And, you know, obviously, there’s the legal framework that you mentioned that I think would be very helpful.

But are there other incentives that we could either create or think through that might alter the calculus of someone like the Daimler CEO when he feels it necessary to twice apologize for having used a Dalai Lama quote?

DÖPFNER: So a very simple business rule is as long as I have growth potential in my core business and in my core market I focus on my core market and my core business. Only if I see the ceiling I have to go beyond it and I have to try something new in other geographies.

Here, if we define our geography 70 percent of the world economy, if there is enough room to grow within that ecosystem why would I be obliged to deal with Iran or with other bad actors?

BESCHLOSS: Exactly.

Q: So just to follow up on that, I’m thinking—and I liked that it said doing business with—

BESCHLOSS: Did you want to introduce yourself?

Q: Oh, sorry. Larry Garber, independent consultant affiliated with various universities.

But I’m curious about the—you know, the Saudi Arabia issue. You know, I mean, still many of the countries in Europe, elsewhere, are dependent on oil from Saudi Arabia and various neighbors, none of which can be anywhere described as democracies and none of them that look like they’re moving towards democracy in the short term.

So how do we do business with those countries under this proposed formula that you’ve laid out?

DÖPFNER: Yeah. That is a very interesting and complicated issue because I fully buy the logic of a special relationship with Saudi Arabia in the context of security issues, particularly around the Middle East, around Israel, and I get that.

I also see, of course, the economic importance of Saudi Arabia and I see how efficiently Saudi Arabia is basically expanding all around the world in Western democracies in order to make sure that we become friends, and I understand the widely spread logic of a U.S. policy that Saudi Arabia is something special.

If we are talking about principles and values I think we have to be principled, and if we start with exceptions—Saudi Arabia is so nice and they are the enemy of our enemy—we are already heading towards the wrong direction.

I am deeply convinced that this policy that the enemy of our enemy is our friend did not work over the past. We have seen it with Iran and Iraq. We have seen it in Egypt. We have seen it in Syria and Afghanistan, elsewhere. It fails quite often and I’m very sure it’s also going to fail with Saudi Arabia.

Look to the concrete actions that Saudi Arabia came up, and I’m not only referring to Jamal Khashoggi’s slaughtering. But to expect that such a system that praises itself because now finally women are allowed to drive cars, that that is going to become a reliable partner for us, I’m very skeptical about it.

So, yes, my principle also applies for Saudi Arabia.

BESCHLOSS: Let me thank everyone for joining us today and especially to thank you, Mathias, for really joining us on a very, very busy schedule that you have and I hope that you come back to the Council.

And I encourage everyone to read your books and, as I said, to buy many more copies and give to your friends. I think The Trade Trap will really have a huge amount of influence in terms of boardrooms, in terms of classrooms, colleges, universities, dinner tables, and also alongside some of CFR’s educational materials and teaching tools like we now have with the model of democracy.

We also will have, by the way, the video and transcript of today’s meetings available to us, CFR members, and on the website.

But with that, let me thank you again, Mathias, for really spending so much time with us.

DÖPFNER: Thank you so much for the time. (Applause.)

(END)