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CNBC Transcript: U.S. Permanent Representative to NATO, Ambassador Kay Bailey Hutchison

Below are excerpts from a CNBC interview with U.S. Permanent Representative to NATO, Ambassador Kay Bailey Hutchison and CNBC's Hadley Gamble.

Hadley: I'm joined by Ambassador Kay Bailey Hutchison, she's the US permanent representative to NATO. So great to see you, Ambassador. Thank you so much for joining us on CNBC.

Hutchinson: Thank you Hadley.

Hadley: I want to kick off by asking you to respond to some of the comments I had earlier today from NATO's secretary general. I asked him about all of the "brain dead" bashing. I said, isn't that counterproductive to what you're trying to achieve? And he said yes, but at the same time, it does prove the point that with so many different opinions and so many different countries, we're actually stronger than we would be apart. What's your take on that?

Hutchinson: Well, of course, the main point is NATO is very strong. We are unified and we are strong. Do we have disagreements among our different countries? Absolutely, we do. It is a place that we can come together, though, with one solid goal, and that is our collective security. And I think we are stronger now than we have been since the Cold War. So I think that President Macron's comments are not on target. I think we are stronger. NATO is stepping up. Our allies are stepping up. We're sharing responsibility and speaking with twenty nine voices is very important in this day and age in the world.

Hadley: When you think about what happened over the last several weeks in terms of that "brain dead" bashing, do you think that's a bit rich coming from the French, considering they're not actually paying what they're expected to pay as a NATO member? They're not reaching that 2 percent.

Hutchinson: Well, they are working toward 2 percent. I hope that the French will look at how much we're doing in NATO and participate more. I do. We work with the French in Sahel where they are a lead nation. We would like to have them in Afghanistan working with us on the issues of counterterrorism there. We've got so much that we can do together and we want France to come in and be a part of that. So, yes, we want to work together. We will continue to try to bring them in. I think they have a great bilateral relationship with the US and with other countries. I want them to also feel like NATO is the place for the collective security, the big issues that we can face better as 29 rather than any one of us could alone.

Hadley: There was so much criticism of President Trump initially in terms of his attitude towards NATO. Now to see President Erdogan as well as President Macron coming out with such negative rhetoric, do you think that's a bit pot calling the kettle black?

Hutchinson: Well, I think President Trump is now seeing that the urging that he has made of our allies to step up is working because we're looking at one hundred and thirty billion dollars in just two years of increase from non U.S. allies, all the others, Canada and the Europeans. So the president is seeing that we are a unified alliance. And, you know, I've served, Hadley, with four presidents. I was in the United States Senate. Every one of them said Europeans should do more -

Hadley: - But no one is actually are able to push that down the road, to make that happen -

Hutchinson: And now they are. President Trump has been forceful and it's worked.

Hadley: So do you think the criticism was worth it, given the result?

Hutchinson: Oh, I do think the result is absolutely worth it. Pushing has made the difference. And now we are allied. We do have Europeans stepping up much more, both in the common funding share as well as in the defense spending. Europeans are seeing that this alliance is very important for all of us to save our security umbrella. Because we face a lot of challenges. We face terrorism. We face an aggressive Russia. We face China that is now doing more militarily than they've ever done before. They're not an adversary, but we need to prepare for all eventualities. And that's what America pushes and why we are the leader of this alliance and why it is strong and getting better.

Hadley: Not just speaking to NATO's secretary general earlier today, but even speaking a few weeks ago to Condoleezza Rice, the former secretary of state, again and again, I've heard the same message, which is that while Russia continues to be a problem, it's China that we should be focused on. It's China and how we deal with China over the next 10 to 20 years that should be the main focus of not just the NATO alliance, frankly, but of the United States.

Hutchinson: Well, absolutely. We are assessing China now and that's relatively new because China didn't do military very much in the past. But now they are. And we have to face that and we have to see it clear eyed. Do do we want China to be an enemy? No, we don't. But we must prepare. That's the strength of NATO, it's deterrence, so that we don't have to defend. And China now is - they have the Belt and Road Initiative. They're controlling a lot of the container ports throughout Europe as well as in the Asian community as well.

Hadley: Why do you think it too so long for Americans to really understand the kind of economic diplomacy that China was using?

Hutchinson: You know, that's a very good question, because we have let China get by with not meeting World Trade Organization standards. We've made them a part of WTO thinking that would bring them in to a rules based order. But it hasn't. So they've now turned into a competitor, but they still expect to have the acquiescence to not abiding by the rules to stealing technology and intellectual property. And we've let them get by with it. Now we can't. They are a competitor. They're very strong competitor. And as long as they are a fair and level playing field competitor, we're fine with that. We can compete on a level playing field.

Hadley: How would you address those then who would suggest that the U.S. China trade spat, that the president's actually endangering the global economy by what he's doing?

Hutchinson: If you talk to any person in international business doing business with China, they are supporting what the president is doing to try to create a level playing field, a competitive playing field. We're not asking for advantage, but we are now saying to China, you can't take the advantages that you have in the past. You have to come in to a level playing field because you're growing and we want to trade. It will be in both of our interest to have fair trade but the lopsided-ness is not going to work anymore.

Hadley: Do you see this as a new Cold War scenario in the sense that it's no longer Russia that we're most concerned with?

Hutchinson: I would say that China is certainly in the long term a strategic competitor because they are developed and they weren't developed before. They were an underdeveloped nation. Now they are developed and they have a lot of space. They have a lot of competitive advantages. So now I think we have to bring them into the rules based order. Don't declare them an adversary right now, but be very watchful of their military buildup in the South China Sea, of this effort they have now with the Belt and Road Initiative to take over ports and infrastructure. So I think we have to see what's happening, prepare for it and hope that they would be a strong trading partner. That would be in both of our interests. That's what we're working for. And I think President Trump is doing the right thing by being very firm that we're not going to have intellectual property theft subsidies that are not allowed for other nations and continue to trade as if there's no barrier, because there is a barrier.

Hadley: Ambassador, what are we going to see from President Trump this week. He's going to be here in London. He's going to be with his NATO counterparts. Are we going to see the aggressive kind of rhetoric we've seen in the past?

Hutchinson: Well, I think President Trump has asked a lot from our allies, and I think he is seeing that the trend is going in the right direction. I think he thinks we need to do more, as do I. As to all of us, our allies are ready to acknowledge that we need to do more. The 2 percent goal for defense spending is not something that came out of the air. It was passed in 2014. President Trump wasn't even president. But what it meant was that we were going to gear up to be much stronger in our deterrence efforts. And it took the 2 percent investment to make sure that we had all the equipment, all of the forces, all of the capabilities that we need to deter Russia and a looming issue of China terrorism. All of these are factors for our collective security that 2 percent is needed to have an effective defense. So we are pushing for that continuing. We're not where we need to be, but we are going in the right direction. And I think that the president will acknowledge that.

Hadley: When you look at what's happening next in terms of spending within NATO and your NATO counterparts, particularly the Germans, they've stepped up. Are these nations where they need to be?

Hutchinson: We're not where we need to be yet, but we are going in the right direction. Every nation is increasing now and Germany is increasing 80 percent. They are going up. They're not where they need to be. They acknowledge they're not where where they need to be. Chancellor Merkel has said that. Chancellor Merkel said just in the last two weeks that we need America in NATO and we need the NATO alliance to be our collective security. So I think she is a very forceful leader in saying we need to do more.

Hadley: She is not as powerful internally as she once was. Does that cause problems for NATO down the run?

Hutchinson: Well, of course, she doesn't have the clear shot as her as chancellor because she has a divided government and because she has had to make a coalition. She is not able to do everything directly as she says she thinks that Germany needs.

Hadley: Does that hurt NATO?

Hutchinson: Yes, it hurts NATO that you don't have that clear way toward that defense spending. But what we're trying to do is to show that Germany has the capacity to do more and they need to be the pillar of strength that their economy would show that they can be. And so we're urging them and they are saying they're going to go in the right direction. I believe they will. But it's not quite as quick as we think it should be. And I think most certainly the emphasis is now there. And I think all of our nations are pushing hard to do more there. They're investing more in defense, more in airplanes, ships, submarines, equipment. That's what we need to show, that we can stand up against any aggressor, whether it's terrorism, whether it's Russia, whether it's China or something we haven't seen yet.

Hadley: Ambassador, we're going to leave it there. Thank you so much for joining us.

Hutchinson: Thank you.