CHARLES: DOW JONES INDUSTRIAL
AVERAGE OFF 225 POINTS.
ALL THREE OF THE MAJOR INDICES
DOWN LESS THAN 1% BUT GETTING
VERY CLOSE.
WHEN THE SHOW BEGAN THE DOW WAS
OFF 230 POINTS.
MAYBE FINALLY SOME EQUALIBRIUM
AS WE HEAD INTO THE LAST HOUR OF
TRADING.
WE'LL CONTINUE TO WATCH THESE
MARKETS.
>>> DESPITE PRESIDENT TRUMP'S
PRO-MILITARY POLICIES A NEW
REPORT SAYS THE STRENGTH OF
AMERICA'S MILITARY IS BORDERING
ON A NATIONAL SECURITY
EMERGENCY.
THE BIPARTISAN NATIONAL DEFENSE
STRATEGY COMMISSION SAYS YEARS
OF IGNORED WARNINGS COUPLED WITH
A SLOW, INEFFECTIVE RESPONSE TO
THE GROWING THREATS OF CHINA AND
RUSSIA HAVE LEFT THE UNITED
STATES IN A VERY PRECARIOUS
POSITION.
JOINING ME NOW TO DISCUSS,
REBECCA GRANT, FORMER SECRETARY
OF THE AIR FORCE.
REBECCA, THIS IS A SHOCKING
REPORT.
IT CAME OUT AT 10:30.
I'M NOT SURE IT DIDN'T PLAY A
ROLE IN THIS MARKET GETTING
WEAKER.
SUGGESTING WE COULD PERHAPS LOSE
A WAR TO ONE OF THESE COUNTRIES?
WHAT DO YOU MAKE OF IT?
>> IT'S A SHOCKING REPORT BUT IT
BUILDS ON SECRETARY MATTIS'
NATIONAL DEFENSE STRATEGY WHICH
DIRECTLY CALLED OUT THREATS FROM
RUSSIA AND FROM CHINA.
CHARLES, WHAT IS DIFFERENT HERE,
THESE THREATS REALLY INCLUDE
CYBERATTACKS.
THEY INCLUDE INCREASED USE OF
ELECTRONIC WARFARE.
WE STILL HAVE A TECHNICAL EDGE
BUT THE BUILD-UP OF CHINA AND
RUSSIA'S FORCES AND THEIR
AGGRESSIVE ACTIONS AROUND THE
GLOBE HAVE MADE IT MUCH HARDER
FOR US TO KEEP OUR EDGE OF
SUPERIORITY.
CHARLES: A LOT REVOLVED AROUND
THE BELT ROAD INITIATIVE AND
MADE IN 20092025 INITIATIVES.
TO YOUR POINT THERE IS STUFF ON
HARD WAYSIDE, IMPROVED AIR
FORCE.
ENCROACHMENT AROUND THE WORLD.
THEY BUILT A BASE IN JIB BEAUTY.
PRETTY SOON, BLUE WATER
CAPABILITIES.
THEY SEEM TO BE SPECIFICALLY
HONING IN, SPECIFICALLY AT
AMERICA.
THAT IS THEIR ULTIMATE GOAL TO
BE ABLE TO CHALLENGE US
MILITARILY.
WHY ARE WE CAUGHT SO FLAT
FOOTED?
>> 100% RIGHT, CHALLENGING THE
U.S. MILITARY IN THE WESTERN
PACIFIC IS THEIR NUMBER ONE
GOAL.
WE'RE NOT EXACTLY FLAT-FOOTED.
BUT WE'RE DEALING WITH LONG-TERM
TREND.
OUR ONGOING PROBLEMS WITH
READINESS, PARTICULARLY AVIATION
READINESS AND WE'RE JUST NOW
TURNING TO MAKE LONG-TERM
INVESTMENTS TO PROTECT
EVERYTHING FROM OUR NUCLEAR
COMMAND-AND-CONTROL, DOWN TO HOW
WE USE OUR MARINE AMPHIBIOUS
READY GROUP.
A NEW CHANGE FOR US.
CHINA IS WORKING HARD TO DEVELOP
THE J-20 FIGHTER AND MISSILES
LAST WEEK AT THE AIRSHOW.
WE SEE A LOT OF NEW AND FRESH
ACTIVITY FROM THEIR NAVY,
PARTICULARLY IN THE SOUTH CHINA
SEAS.
CHARLES: REBECCA, THE REPORT
SOUNDING A WORD OF CAUTION ON
SORT OF TECHNOLOGIES WE IMPORT
FROM CHINA.
THERE WAS A REPORT NOT LONG AGO
OF TINY CHIPS BEING EMBEDDED IN
CERTAIN PRODUCTS.
COMPANIES INVOLVED NAMED IN THE
REPORT DENY IT.
BUT ALSO ZTE AND 5G, A LOT OF
DIFFICULT TECHNOLOGIES UNVEILED
HERE SOON.
DO WE PUSH BACK ON ALL OF THEM?
HOW DO WE SAFEGUARD NONE OF THEM
ARE SORT OF TROJAN HORSES?
>> WE NEED INCREDIBLE VIGILANCE
AND THAT REPORT ABOUT THE CHIPS,
THERE IS JUST NO WAY THAT
HOMELAND SECURITY CAN CERTIFY
THAT EVERY CHIP IS SAFE.
SO THE STEPS ARE BASIC.
WE HAVE TO PROTECT THE SUPPLY
CHAINS.
COMPANIES HAVE TO ASSUME THERE
IS ONGOING CHINESE, RUSSIAN AND
OTHER PENETRATION OF NETWORKS.
SO WE NEED THE BEST LEVELS OF
CYBERSECURITY.
WE NEED TO BE VERY CAREFUL WHAT
WE TRADE WITH CHINA AT THIS
POINT BECAUSE OF THOSE EXACT
THREATS.
CHARLES: THE PUBLIC SHOULD KNOW
THIS COMMISSION CONDUCTED SIX
PUBLIC HEARINGS.
THEY HAD TESTIMONY FROM 56
EXPERT WITNESSES FROM
GOVERNMENT, PRIVATE, ACADEMIA,
THINK TANKS, RESEARCH
INSTITUTIONS, OTHER BACKGROUNDS
AND IT WAS BIPARTISAN.
THIS IS A SERIOUS REPORT AND WE
