Thank you, Boris, for the kind invitation to be with you this afternoon. I’m honored to help commemorate the 70th anniversary of the founding of the Instituto per gli Studi di Politica Internazionale. Congratulations, and happy anniversary to I.S.P.I. One of the reasons for your longevity is no doubt your willingness to take on the most important topics of the day, and it’s particularly significant that we gather here to discuss “Transatlantic Relations One Year After the Iraq War.”

Since I arrived at NATO in August 2001, the Alliance has weathered two significant historical events that are having -- and will continue to have -- a profound and lasting impact on trans-Atlantic relations. The first was, of course, the September 11 attack on the U.S. – which brought the Alliance together under Article 5 for the first time in our history. NATO Allies reacted by launching the most revolutionary reforms in our history, creating quite literally, a new NATO ready to stand on the front lines of the war on terrorism. The second events was the Iraq War, which plunged the Alliance into a crisis of confidence and disunity in 2003. As we meet in Milan, that crisis has subsided and NATO has emerged strengthened in 2004 for new peacekeeping roles in Afghanistan and Iraq.

Italy, the United States and all of our allies can be proud of our 55-year alliance in NATO. Italy is fully engaged in NATO’s new operations in Afghanistan and in Iraq, and in fact, Italy sustained its first combat losses since World War II in Iraq, when the Carabinieri Headquarters in Nassiriyah was attacked and 19 soldiers died. Our hearts went out to Italy and to the families of those soldiers. At NATO, we well understand the sacrifices our nations are making for democracy and security in those distant places. While times have changed, NATO’s mission is the same today as it was in 1949 – to defend the peace and the territories and citizens of all allied countries. The task for NATO in 2004 is two-fold: to advance the political and military reforms that September 11 triggered within the Alliance, and to restore the trans-Atlantic unity so badly strained by the Iraq War but so essential to NATO’s success as we seek to build a peaceful world and confront the new security challenges of our era.

NATO faces a new challenge far different than any we have confronted before. It is not a confrontation between states as much as a threat from failed states and small, but fanatical terrorist groups. We see terrorism as an existential threat to all who prize freedom and security. We must confront it, not just by military means, but by a broad international effort to cooperate in intelligence and law enforcement, and through diplomatic and economic means to protect our peoples and to promote a more peaceful future.

The surest path to success in this new campaign is to make full use of the major institutions upon which international stability is based -- the United Nations, the G-8, the European Union, and NATO.

We in NATO have been hard at work, and I am pleased to report to you that the Alliance is active, strong and fully modernized for the challenges ahead. During the past two and half years, NATO has accomplished the most fundamental re-tooling of the Alliance since its creation in 1949. We have succeeded in creating a new NATO-- different in mission, membership and capabilities than the old Cold War NATO or even the NATO of the 1990s. NATO Allies answered the 9/11 wake-up call, agreeing on the blueprint for the new NATO at the Prague Summit in 2002. The full results of our transformation efforts should be evident at NATO’s Istanbul Summit in June 2004.

NATO’s most profound change is in our mission -- our transformation from a defensive and static military alliance which massed a huge, heavy army to deter a Soviet threat to Western Europe to a more flexible, modern, and agile force focused on responding to threats from well beyond the European continent.

Put simply, NATO’s past was focused inward, on Cold War threats directed at the heart of Europe. NATO’s future is to look outward to the Greater Middle East to expand security in that arc of countries from South and Central Asia to the Middle East and North Africa—where the new challenges to global peace are rooted.

This transition is happening as we speak. While the majority of NATO forces are deployed today in Bosnia and Kosovo, the majority could well be in Afghanistan and Iraq one year from now. History has given NATO a new challenge and we are responding to it with a new strategic vision. As Secretary of State Colin Powell said recently: “We fight terror because we must, but we seek a better world because we can—because it is our desire and destiny to do so.”

The changes to NATO are most evident, most comprehensive and most impressive in our military capability. The result is that NATO remains today the strongest military alliance of our time.

I am proud that the majority of these reforms were proposed by the United States. In just two years, we’ve changed NATO more than at any time in our history. Consider the following:

-- In a major new initiative launched at the 2002 Prague Summit, NATO Allies agreed to acquire, over time, a range of new military capabilities necessary for the expeditionary missions far from Europe that are our future—modern airlift and refueling, precision-guided munitions, air-to-ground surveillance, combat service support—redefining the way allies plan and think about our national and collective defense.

-- In Summer 2003, NATO adopted a leaner and more flexible 21st century military command structure, negotiated in record time. We created a new Alliance Transformation Command in Norfolk to plug European Allies into the revolutionary new concepts in training, doctrine, and military technology being pioneered by the U.S. Joint Forces Command co-located with NATO in Norfolk, Virginia.

-- In December, NATO created a new Chemical, Biological and Nuclear Defense Battalion, spearheaded by the Czech Republic and with the participation of 11 other Allies, to protect our civilian populations in the event of an attack using weapons of mass destruction.

--And in the most important and decisive shift to a 21st century alliance, we are building a NATO Response Force, conceived by Secretary of Defense Don Rumsfeld and already partly operational. It will give us a powerful and quick capability to deploy our troops within days to perform any mission -- whether hostage rescue, humanitarian relief, or response to a terrorist attack -- in another part of the globe. This new force will give NATO the ability to act more quickly and decisively inside and outside of the transatlantic sphere than ever before in its history.

Those revolutionary changes on the military side of NATO are complemented by equally creative political changes within the Alliance:

-- Seven Central European countries will join NATO in late March. This is NATO’s greatest enlargement since our founding in 1949. The old Cold War wisdom was to worry that adding new countries would weaken the Alliance — one more country to defend. The new wisdom is that enlargement strengthens us — one more country to promote peace and freedom with us in the Balkans, Afghanistan and Iraq. NATO enlargement extends our sphere of security eastward virtually across two continents and helps to consolidate the democratic revolution in the former Warsaw Pact countries.

--Once the seven new members join the Alliance, forty percent of NATO will be formerly communist countries. These new members will refresh the spirit of the Alliance and add real value militarily and politically to our collective strength.

-- NATO has changed in one other important respect. We know that our greatest strategic aim is to help create, in President Bush’s words, “a Europe whole, free, united and at peace,”—everything Europe was not during the tumultuous twentieth century. The emerging democratic peace in Europe is a major, historic achievement for which NATO deserves much credit. But, a united Europe will only be sustained if we build partnerships with those countries outside of NATO and the EU but which are nonetheless critical for Europe’s future, especially Russia and Ukraine.

-- Perhaps our most important new partnership is with Russia. We established the NATO-Russia Council in May 2002, and it is redefining, for the better, our relations with Moscow. While the Council is off to a good start, we can do better -- both to work out remaining differences with Moscow over its troop presence in Georgia and Moldova, and at the same time, to promote closer relations between our militaries and more shared work in theatre missile defense, counter-terrorism, and counter-proliferation.

-- The same is true of NATO’s special relationship with Ukraine in the NATO-Ukraine Commission. Ukraine is a country of strategic importance and the U.S. welcomes its aspiration to grow closer to NATO over time. But for this to occur, we will need to see much stronger and sustained initiatives for domestic and military reform by its government.

-- The U.S. has also called for a new strategic outreach and engagement to the countries of Central Asia and the Caucasus in 2004. We want NATO to establish offices in these countries and to expand our political and military activities with them. This critical region should be the new focus for Partnership for Peace in the years ahead.

-- NATO also has a new strategic partnership with the European Union. The U.S. supports a strong EU and a capable European defense that is grounded in cooperation rather than in competition with NATO. As Europe takes on more responsibility for its own security, it is crucial that we build a useful and constructive relationship between NATO and the EU. For the U.S., however, NATO must remain the pre-eminent security institution binding North America to Europe and the core of our collective efforts to keep the peace in Europe and beyond.

These substantial changes in our military mission, membership and partnerships have positioned NATO for an ambitious future. But, we would be well advised to learn from the lessons of the Iraq crisis that engulfed NATO just one year ago as we promote a future of broader trans-Atlantic defense cooperation. It would be tempting to sweep last year’s differences on Iraq under the rug, close the door and look ahead, but the tensions, divisions and damage were real and we need to account for them.

The divisions that split the Alliance in 2003 were deep and profound. We debated the legitimate use of military power, the tactic of pre-emption, the role of the UN in adjudicating global conflicts, and the nature of the threat from weapons of mass destruction. The debate at NATO was also about the role and power of the U.S. in the world and what some Europeans perceived as the unilateral use of that power. On our side of the Atlantic, some Americans wondered if a divided Europe had the will and capacity to face the most serious threats to world peace.

In the aftermath of the Iraq crisis, some pundits on both sides of the Atlantic have argued that NATO and the future of trans-Atlantic relations are at a turning point. They claim the ties that have held us together for two generations since the end of the Second World War are beginning to weaken. A few say the transatlantic relationship will never be the same.

While Europe’s relations with America are indeed changing in many ways, I do not believe that we are headed for a separation in our Alliance, much less a divorce as the most strident critics predict. I am confident that NATO will continue to recreate itself and remain strong and purposeful for the future. We would be wise not to overreact to the Iraq crisis for several important reasons.

First, this is not the only disagreement we’ve had with some European countries in NATO in the last half-century and it won’t be the last. Remember the Suez Crisis, arguments over Vietnam, the Pershing Missile crisis of the eighties and differences over Bosnia strategy in the early nineties. NATO survived each of these crises by the Allies’ learning, adapting and compromising with each other. And we emerged strengthened and changed each time. Ours is a strong but flexible Alliance, durable enough to sustain different points of view. NATO is, after all, a democratic Alliance that does not require the ideological uniformity of the Warsaw Pact to remain successful and united.

Second, there is no monolithic European movement that wants to separate Europe from the U.S. and there is no significant group in my country that would support such a rupture either. The great majority of Europeans and American understand a central fact—our security is indivisible. We need each other’s support in one alliance to meet the challenges of the modern world.

Most of all, NATO will stay strong because our mutual interests demand it. Europeans continue to rely on the U.S. for the nuclear and conventional defense of the continent. Of the many issues Europeans are debating for their new constitution, for example, what is missing is the call for an overarching European security umbrella to maintain peace on the continent. No such initiative is needed because NATO and the U.S. provide that now as we will in the future.

The United States also needs Europe. We Americans cannot confront the global transnational threats that go under, over and through our borders and that are the greatest challenges of our time, without Europe. Weapons of Mass Destruction and terrorism, the huge increase in international crime, narcotics flows, trafficking in human beings, Global Climate Change, AIDS—there are no unilateral solutions to these challenges. Instead, we can hope to succeed only through multilateral cooperation with Europe.

When all is said and done, the U.S., Canada and Europe are natural allies. We are the most like-minded peoples on the planet, sharing a common history, common democratic values, and an interconnected economy. NATO will stay together – in a not always harmonious or easy marriage – because we need each other. There is nothing more important to all of us in NATO for 2004 than healing the rift from the Iraq crisis, re-energizing the Alliance and moving forward together, as we have begun to do successfully since the end of the Iraq War.

As we look ahead to 2004, with last year’s events firmly in mind, here are the top five goals for all of us in NATO in the months ahead.

Our first goal is to reinforce NATO’s long-term peacekeeping role in Afghanistan. NATO has command of the UN-mandated International Security Assistance Force in Kabul. Our Defense Ministers decided on February 6 to move out of our Kabul command post to build a nation-wide presence, starting with the Provincial Reconstruction Team (PRT) led by Germany in the northern city of Konduz. NATO is moving to create five Provincial Reconstruction Teams (PRTs) in the next six months to bring stability to important provincial cities. Italy has, in fact, agreed -- and Minister Martino has made the announcement -- that it will lead one of the new PRTs in Afghanistan. As Secretary of Defense Rumsfeld said in Munich on February 6, the U.S. hopes NATO will decide to take command of existing coalition PRTs in the country. Ultimately, we hope NATO will be in a position to take over responsibility for all military operations, including the U.S.-led coalition – as soon as security circumstances permit.

There is no international goal more important than helping the Afghan people to rebuild their shattered country. To be successful, NATO will need to commit even more troops and military resources in perhaps the most difficult mission we have ever undertaken. Building on the success of the recent Loya Jirga, we must help the Afghan government to extend its authority outside Kabul and to prepare for nationwide elections. To do that, the U.S. calls on European nations to contribute more troops and resources to join the 13,000 American troops already there, in order to construct a more vigorous NATO presence in the country.

Our second aim for this year is to examine how NATO might take on a collective military role in Iraq, as Secretary Powell and Secretary Rumsfeld have suggested in recent months. While the UN and other international aid agencies will provide the lion’s share of economic and humanitarian assistance, NATO can offer something of inestimable value—security to give Iraqis the time and confidence to make this great transition from dictatorship to a better future. No matter our position on the war itself, Europeans and Americans share a common interest in seeing democracy take root in Iraq.

Italy has understood this from the outset, making generous financial contributions to Iraq’s future at the Madrid Donors’ Conference last year. Italy is one of the three troop largest contributors to Operation Iraqi Freedom, and regrettably, the blood of Italian soldiers has been spilled in Iraq. But the Italian Senate vowed that Italy would stand firm, and courageously passed an extension on February 18 – just two days ago -- to allow troops to remain there.

NATO can do its part by taking on a collective military mission in 2004. The U.S. and other allies have suggested that NATO consider taking command of the multinational division that Poland is currently leading so successfully, once sovereignty has been returned to a new Iraqi government after June 30. There is an emerging consensus at NATO that our Alliance must have a collective presence in Iraq to help confront the challenge of peace and democracy in that country. Defining such a mission will be a leading issue for NATO at our Istanbul Summit in June.

Third, NATO must expand its engagement with Israel and the Moslem world to help those countries find their way toward a more peaceful future in the Greater Middle East. The U.S. wants NATO to be one of the building blocks for our long-term engagement in this vast region. Italy has strongly supported NATO’s decade-old Mediterranean Dialogue. Secretary Powell suggested to NATO Foreign Ministers that we should transform the Mediterranean Dialogue into a true Partnership offering military training and exercises and a closer political relationship. We want NATO allies to combine efforts with Moslem countries and Israel to help interdict narcotics, stem terrorism and promote peace in that critical part of the world. Long-term change in the Middle East will help to attack the foundations of the terrorism crisis and give the growth of democracy and justice a chance to take root. It is a challenge that none of us, Europeans and Americans alike, can avoid, and that all of us must embrace as one of the critical foreign policy tests of our time.

Our fourth goal is to improve relations between the two great institutions responsible for Europe’s future—NATO and the EU. Both organizations will admit new members from Central Europe this spring. This twin enlargement will advance our common goal of a Europe whole, free, and at peace, and will do more than any other initiative to integrate Europe East and West for the very first time in Europe’s long history. In the Balkans, Italy remains the second- largest contributor of troops to NATO’s operations and has played a critically important role in the stabilization and development of that region. NATO is now ready to consider concluding our peacekeeping mission in Bosnia as a success in December 2004. We’ve done an outstanding job there, having stopped the war and kept the peace for nearly eight and a half years. Our leaders will consider supporting a new EU mission under the “Berlin Plus” framework for military cooperation agreed by the two organizations. But the U.S. wants NATO to maintain a military headquarters in Sarajevo to help Bosnian authorities to bring Radovan Karadic and Ratko Mladic, two indicted war criminals, to justice. Together, we must continue to support the transition to stable, market-oriented democracies in Kosovo, Bosnia and Macedonia so that the Balkans takes its rightful place in an integrated Europe.

NATO and the EU sometimes differed in 2003 in theological disputes over Berlin Plus, the Balkans and EU defense plans. We can improve relations between NATO and the EU by avoiding rivalry in the defense sphere and promoting cooperation on the most important issue of our time—stemming the proliferation of weapons of mass destruction. NATO, of course, should remain the core of Europe’s defense; the United States will always defend NATO’s centrality. The choice is not – as some in Europe would suggest -- between a Europe under the U.S. yoke, or an independent Europe. We can instead choose a future of cooperation between NATO and the EU that will benefit Europeans and North Americans alike, and that will recognize and support a strengthened EU working cooperatively with a modernized and renewed NATO.

Finally, our fifth aim this year is to elevate NATO’s relations with Russia. Our constructive engagement with Russia, through the NATO-Russia Council, has helped make our citizenry safer and more secure today than at any time in the last 50 years. There is so much NATO can do with Russia -- from search and rescue at sea to theater missile defense to greater cooperation in the Black Sea to joint peacekeeping. Our NATO-Russia Council is a good forum but we can do even better. We need to set our sights higher on a closer relationship that will put our past rivalry behind us forever.

These are our top five goals at NATO in the coming year. It is an ambitious and vital agenda and one we must fulfill in this time of great challenge for all of us. NATO’s prospects for achieving such an ambitious 2004 agenda will depend on how successful we are in removing the current major obstacles to good U.S.-European relations.

The first of these challenges is the persistent gap in military capabilities between the U.S. and the rest of its Allies. If NATO is to field long-term missions in Iraq and Afghanistan and remain in Kosovo, our European allies will need to spend more – and more wisely -- on defense and produce more effective militaries. The capabilities gap between the U.S. and all its allies is huge and growing. The U.S. will spend $400 billion on defense this year; the eighteen Allies combined around $140 billion. The problem is not just the spending gap but the fact that the U.S., by devoting more on research and development, is yielding far more from its defense investments than our Allies, who still devote a considerable portion of their budgets to territorial defenses and high personnel costs. While not a new problem for NATO, the U.S. has a right to know if we must continue to shoulder such a substantial share of NATO’s defense burdens or if our allies here in Europe will step up to their responsibilities. The U.K., Norway, France and others are doing their share, but I cannot say the same of other allies whose strapped budgets are frozen or in decline.

In addition to the technology gap between us, there is an even more critical “usability gap.” Of Europe’s 2.4 million men and women in uniform, only roughly three percent are now deployed on our priority missions in the Balkans, Afghanistan, and Iraq. Italy is currently well-represented in all three missions, and has proven itself able to deploy its soldiers on the toughest assignments. But elsewhere across the Alliance, there are declining budgets, poor training and standards, and a continued reliance on conscription that is no longer useful in the post-Cold War world. Forces that are static, that are not ever intended for deployment, are essentially forces that make no contribution to NATO, and cannot be considered part of an Ally's sharing of the NATO burden.

The European allies and Canada must do more to ensure the usability and deployability of their forces if NATO is to succeed in the 21st century. NATO’s most basic military challenge is not that our forces are overstretched, but underutilized. All of us, including the U.S., must reform our defense forces so that more of our personnel are trained for the difficult foreign missions that will likely be our responsibility for some years to come.

Finally, let me cite two other barriers to a healthy transatlantic relationship that all of us must overcome in 2004 and beyond.

In my view, Europeans would do well to remember the importance of the trans-Atlantic link as a vital feature of your future security. I say this because there are a few leaders on the Continent calling for Europe and the European Union to become a counterweight to the U.S. This suggests that our future should be one of strategic rivalry and competition—the very antithesis of the transatlantic community we have built together since the end of the Second World War. Such a reversal would amount to a colossal strategic error. It would repudiate the primary factor that has produced two generations of peace and unparalleled security and unity in Europe—the presence of the United States military on this continent and the existence of NATO. I do not believe that the vast majority of Europeans would support such a future or that it will occur. But, Europe’s responsibility to preserve healthy transatlantic ties, it seems to me, is to reject this competitive view of our common future and to avoid the gratuitous anti-Americanism that was all too evident in European public discourse during the past year.

Americans have an equal obligation to reject unilateralism and work instead to preserve the great multilateral institutions such as NATO that are so important for our common future. For the U.S., President Bush and Secretary Powell have emphasized repeatedly our commitment to “effective multilateralism,” and have demonstrated that convincingly by acting in concert with friends and allies to confront crises in North Korea, Sudan, India/Pakistan and Libya in recent months. The U.S. commitment to working within NATO has never been more clear than in the past year.

Nonetheless, many European critics have accused the United States of losing interest in NATO since September 11, 2001 and using it as a toolbox. Ironically, it is the United States that has proposed nearly all of the initiatives that have reformed NATO’s structure and mission in the last two years. And it is the United States that now calls for ambitious NATO deployments in Afghanistan and Iraq. The United States has demonstrated its genuine desire to see the new NATO act collectively. We hope now that our European Allies will agree to use NATO as aggressively as we wish to do in 2004 and for years to come.

It is true that acting in alliances isn’t as efficient as acting alone. Alliances don’t move as fast, and they may complicate our decision-making and even our tactics in the field. But Alliances are very effective in producing sustained, long-term commitment in the most difficult crises, as we have seen NATO do so successfully in the Balkans.

When the new Secretary General of NATO, Jaap de Hoop Scheffer, made his first official visit to Washington in late January, President Bush assured him of NATO’s centrality in the U.S. National Security Strategy. The United States will continue to voice America’s abiding commitment to multilateralism and to NATO. NATO’s numbers tell the story: we are a forum with 46 countries in the Euro-Atlantic Partnership Council; a partnership with 41 countries in the Partnership for Peace; a dialogue with seven Mediterranean states, and an alliance with 26 members. Where else but NATO could any of us replicate this vital web of multilateral relationships?

NATO remains today the world’s most powerful and important alliance, dedicated to preserving peace and freedom for all of our peoples. It took 55 years for Europeans and North Americans to build this Alliance, which serves as our bridge across the Atlantic, our principal forum to work together and our mutual protection in a dangerous world. It is well worth preserving and advancing for all the challenges ahead of us.

In President Kennedy’s words, we NATO Allies will continue to be the “watchmen on the walls of world freedom.” We have many challenges before us, and the U.S. remains dedicated to working with all our Allies to keeping NATO at the center of the great effort to build a democratic, peaceful and secure world in the years ahead.