WHEN: Today, Thursday, March 22, 2018
WHERE: CNBC’s “Power Lunch”
Following is the unofficial transcript of a FIRST ON CNBC interview with U.S. Commerce Secretary Wilbur Ross on CNBC’s “Power Lunch” (M-F 1PM – 3PM) today, Thursday, March 22nd. Following are links to video from the interview on CNBC.com:
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Michelle Caruso-Cabrera: Joining Us Now Live From The White House Lawn Is U.s. Congress Secretary Wilbur Ross. Mr. Secretary, Thanks For Joining Us.
Secretary Wilbur Ross: Well Thank You For Having Me On.
Caruso-cabrera: The Stock Market Down Sharply Today. Investors Are Worried That You Are Starting A Trade War. Are You?
Ross: I Don’t Think So At All. I Think What We’re Really Starting Is The Prelude To A Set Of Negotiations. I Think The Markets Concern Is They Just Don’t Know All The Details And Markets Hate Uncertainty.
Michelle Caruso-Cabrera: So Is Your Premise That There Won’t Be Retaliation And Therefore The Markets Shouldn’t Be Worried Or It Just Isn’t Going To Be As Bad As They Think Based On What You Are Ultimately Going To Do?
Ross: I Think There Will Be Some Ultimate Retaliation. But I Don’t Think It’s Going To Be The End Of The Earth. Think About It, The $60 Billion Figure That The President Mentioned And That You Quoted Is A Tiny Fraction Of Our Economy And A Tiny Fraction Of The Chinese Economy. So It Is Not As Though We’re Blowing Them Up.
Melissa Lee: Are You Prepared Though, Is The Administration Prepared For For There To Be So-called Sacrificial Lambs In This Effort To Get The Trade Deficit With China Down? In Other Words, You Know, If China Decides You Know, We’re Not Going Buy As Much Soybeans, Or Sorgum, You Are You Willing To Say To The Sorgum Growers And The Soybean Growers In The U.s., “that’s Too Bad”? If China Decides To Order From Airbus As Opposed To Boeing Are You Prepared To Say To Boeing, “that’s Too Bad”? You Know, If Apple And Intel Because They Have Manufacturing Facilities In China Get Slaps On The Wrist, Are You Willing To Say, “you Know What, Sorry Guys.” How Much Are You Willing To Endure?
Ross: Well, I Think That It Is Going To Be A Little Bit Different Situation From That. Clearly There’s A High Probability That They Will Take In Sort Of Action. The Question Is What Will It Be? What Will Be The Magnitude? What Will Be The Overall Impact? And What Will Then Be Our Reaction? As You Know What The President Is Seeking, There’s 100 Billion Very Very Near Term Reduction In Our Trade Deficit With China. That Is One Of The Major Targets. The Other Major Target Is Intellectual Property Rights Because That Is Our Future. Things Like Steel And Alumninum Deal Mainly With The Present. Intellectual Property Rights Deals With The Future. And It’s No Accident That Later On This Year U.s. Patent Office Will Be Announcing Its 10 Millionth Patent. No Country In The History Of The World Has Anything Remotely Approaching 10 Million Patents. That Is A Backbone Of Our Economy, It’s Certainly A Core Of Our Future And That Is Why We Must Protect It.
Lee: But Mr. Secretary, Basically You’re Saying To The Markets That There Will Be Some Form Of Retaliation From China. We Just Don’t Know What The Extent Of It.
Michelle Caruso-Cabrera: And We Have To Accept It, Basically Is What You’re Saying. It’s The Price To Achieve What You Want?
> > Well, You Can’t Make Progress Without Taking A Little Bit Of A Risk. And It’s Very Very Important That We Make Overall Progress.
That Was The Spirit Of The Tax
Law The President Got Through. The
Naysayers Said, “oh You Will Never
Get A Tax Reduction, A Big Tax Reduction.”
They Were Wrong. The Naysayers Are Now Saying
That It’s Gonna Be The End Of
Global Trade. They’re Gonna Be Wrong Again.
This Will End Up Being A Negotiation. There May Be Some Firing Shots Over The Bow And Things Like That, But I Believe At The End Of The Day This Will End Up In A Negotiated Settlement.
Bill Griffeth: Speaking Of The Tax Bill, Mr. Secretary, You Know, Fed Chair Jay Powell Yesterday During His News Conference Said That The Fomc During Their Meetings This Week Talked About Trade Policy, Their Concerns About The Impact The Tariffs Would Have On The U.s. Economy. Isn’t It Clear That They’re Saying -- They Are Sending The Signal To The Administration That Trade Policy Is At Odds With What The Fed Is Trying To Do And What The Impact Of The Tax Cuts Were Going To Do On The Economy?
Ross: Well, I Don’t Think So At All. To The Degree You’re Talking When The Steel And Aluminum, Which It Sounds Like You In Part Are, A Fraction Of A Penny On The Cost Of A Can Of Beer- --
Griffeth: I Get That But I Guess, The Bigger Picture, And Even Mr. Powell Was Asked About The Anticipated Tariffs Being Announced Today, Let’s Face It, Tariffs Are Not A Growth Strategy For An Economy, Are They?
Ross: No. The Question Isn’t Are Tariffs As Such A Growth Strategy. The Real Question Is Can We Continue To Afford These Mammoth Trade Deficits That Are Sucking Money Out Of Our Country. A Lot Of The Money That Is Being Used For Other Purposes Is Money That Came From Us In The Form Of Trade Deficits. These Are Not Sustainable Things, So We Have No Alternative But To Try To Deal With The Trade Deficit And The President Is Going To Do So. And It Is Not Just By These Tariffs, We Instituted 58% More Counterbailing Duty And Antidumping Investigations In The Last Year Than The Prior Administration Did. You Have To Enforce The Rules. And While These Other Countries Speak About Free Trade, They Are Actually The Most Protectionist People And We Are The Least Protectionist And The Most Free Trade Of Any Of The Major Countries. We Need A More Reciprocal Relationship And I Believe The Actions That The President Is Taking Ultimately Will End Up With A More Reciprocal Relationship.
Michelle Caruso-Cabrera: Define A Win Then. I Was Gonna Ask. What Is Winning? When China Starts Doing Or Stops Doing What Do These Tariffs End?
Ross: Well, As You Heard From The Conference Today, There Is An Obvious Problem With The Theft Of Intellectual Property. There Is An Obvious Problem With Forced Partnerships That Result In Forced Technology Transfers. Those Are Inappropriate. They Are Not Part Of Free Trade. They Are Not Part Of Fair Trade. And They Are Not Tolerable.
Lee: So That Is A Win? The Win Is If China Basically Goes Back On Every Single Protectionist Policy That They’ve Had In Place To Date When It Comes To Allowing U.s. Companies To Compete In Their Country? Because That Is A Big Ask For A Win.
Ross: Well, We’ll See What They Respond To. What I Was Giving You Was The Direction In Which We’ll Be Heading. The Specific Details Of It Will Have To Be Worked Out. But Directionally, We Must Protect Our Intellectual Property. That Is Our Future
Griffeth: Mr. Secretary, As You Well Know, You Imposed The Tariffs On Aluminum And On Steel For National Security Purposes Among Other Things. But Today You Probably Heard The Chinese Trade Official Said That Under Wto Rules, Our Tariffs Don’t Qualify Because -- Or They Violate The Rules Because The Steel And Aluminum Industries Don’t Qualify Under National Security, Using Your Definition. Have You Heard From The Wto Officials At All On This And What Do You Say To The Chinese Officials?
Ross: Well, We Obviously Disagree With The Chinese Officials. We Have Thoroughly Vetted The 232s With White House Counsel, With Department Of Justice, With Department Of Commerce Counsel, With Ustr Counsel. We Believe That It Is Not By Any Means Appropriate For Some Other Country To Try To Tell The United States Of America What Constitutes Our National Security. And Our Enabling Legislation Under Section 232 Of The 1962 Act Makes It Clear That It Is Not Just Directly Defense Related, It Has Many Other Factors To It Relating To The Overall Economy. So We Don’t Need Other Countries Telling Us How To Define Our National Security. Economic Security Is National Security. And Without Economic Security, There Is No National Security.
Michelle Caruso-Cabrera: Mr. Secretary, Caterpillar, Boeing, They’re Both Offby More Than 3% On Fears That There Will Be Retaliation From China, One Of Their Biggest Markets. Have You Consulted With The Ceos Of The Major Industrials And Talked To Them About These Issues? What Have You Head To Them, What Have They Said To You?
Ross: Well, We’ve Had Thousands Of Pages Of Written Testimony And Probably Hundreds Of Hours Of Conversation With Those Various Parties. There Are A Couple Things Though That I Think One Needs To Focus On. One Is The Relative Preportion Of These Actions And The Others We’ve Taken To The Economy Of China And To Our Economy. This Is Not Going To Put China Into A Depression. Not Going To Put Us Into A Depression. This Is Simply Trying To Cure Abuses. The President Trump And President Xi Have A Very Good Working Relationship With Each Other, Particularly On North Korea. And We’re Not Going To Try To Disrupt That Relationship. But Everybody Even Our Closest Allies Must Play By The Rules. We Do A Better Job Playing By The Rules Than A Very Large Number Of Other Countries. Everybody Must Play By The Rules.
Lee: You Know, It Is Interesting That You Say That Tariffs Won’t, Quote, “put Either Country In A Depression,” But There Is A Long Way Between Where We Are Right Now And A Depression That Could Cause A Lot Of Pain For A Lot Of Americans Out There, Whether They Are Average Americans, Consumers Just Going To The Grocery Store, Paying Higher Price Or Investors In The Stock Market As We Are Seeing Today. Goldman Sachs Had An Interesting Note Out, Mr. Secretary, I’m Not Sure If You Saw This, But Basically They Said The Administration Is Really Implementing Tariffs And Letting It Be A Politically Driven Cycle As Opposed To An Economically Driven Cycle Which It Had Been Historically. Historically When The Economy Is Weaker, That’s When You Look To Exract These Gains From Engaging In A Trade War. As We Know Now, The Economy Is Quite Strong. I Mean That’s What All The Data Tells Us, That’s What The Fed Yesterday, That’s What The Administration Is Telling Us. So Why Are We Doing This Right Now? Why Is It That Right Now When All Of The Ceos Out There Like Fedex Say There Is A Major Global Expansion Under Way, We’re Seeing The Benefits Of Trade Reform, But I’m Worried That A Trade War Is Going To Dent Those Benefits Of Tax Reform. Why Now?
Ross: I Think You Have To Judge This Administration By The Results It Actually Achieves, Not By Somebody’s Hypothetical Concerns About What Might Be The Consequences. Many Of These Same Naysayers About The President’s Trade Actions Were Naysayers That The Economy Could Never Grow More Than 2%. Well, Guess What? It Is. These Same Naysayers Said The President Would Never Get A Big Tax Bill Through And He Did. And The Same Naysayers That Are Now Saying The Sky Is Falling Because Of Tariffs, They’re Gonna Be Proven Wrong Again.
Michelle Caruso-Cabrera: Tell Us A Little Bit More About The Process Within The White House. Has Larry Kudlow Been Involved In These Discussions, Is He On Board With These Moves?
Ross: Larry Kudlow Is Not Yet A Formal Part Of The Administration, But He Is Well Apprised Of What We’ve Been Doing. In Fact, Larry Had Dinner At My House With Me And A Bunch Of Other Folks Last Night.
Michelle Caruso-Cabrera: And Is He On Board With This Move Today?
Ross: You’d Have To Ask Him, But I Believe That He Is Not Yet In The Administration Simply Because Of The Paperwork That Is Required. He Well Understands Our Policy And He Wouldn’t Have Taken The Job Just To Be A Thorn In The President’s Side. He And The President Go Back A Long Ways. Larry Was One Of The Early People Supporting The President As Was I. And We All Know Each Other Pretty Well. And While We May Disagree On Specific Issues, Overall The President’s Policies Are The President’s Policies And It Is Our Job To Implement Them.
Michelle Caruso-Cabrera: And We Have All Known Each Other For A Very Long Time Here, Mr. Secretary. So I’m Going To Push Back One More Time And Ask Is Larry Kudlow On Board With These Tariffs?
Lee: I Mean You Had Dinner With The Guy Last Night. I Mean, What Were You Talking About, The Weather? Talk About China.
Griffeth: We Know He Doesn’t Like Tariffs.
Lee: What Did He Say?
Ross: You Should Ask Larry If You Want To. But It’s Not For Me To Paraphrase Him. As You Well Know From His Years In Tv Journalism, He Is A Very Articulate Spokesperson Of His Own Views And I Think He Fully Understands The Strategy Of Negotiation In Trade Arrangmenets.
Lee: So Before We Let You Go, Mr. Secretary, Let’s Be Clear About This And Get A Bottom Line Here: What Do You Tell Investors And What Do You Tell Ceos Across This Country? Are We Going To Have A Trade War Or Will The Administration Make Sure That We Do Not Enter Into A Trade War?
Ross: Trade War Is A Matter Of Definition. You Could Argue That There Has Been A Trade War Under Way For Decades. The Only Difference Is That We Had Been Relatively Defenseless In It. So It Is Really A Matter Of Definition. I Do Not Believe That There Is Anything We’re Doing That Materially Undermines Any Of The Other Programs Of The President. In Fact, I Believe The End Result Will Be An Enhancement Of It. Now There May Be Some Bumps Along The Way, And There Were Bumps Along The Way With The Tax Legislation, There Are Bumps Along The Way With Everything, But This Is Not Going To Be Blowing Up The World Or Anything Cataclysmic.
Michelle Caruso-Cabrera: Mr. Secretary, We Know You’re A Big Cnbc Watcher. Maybe You’ve Been Busy Lately, But Over The Last Several Days, We Have Been Covering The Situation With Facebook And Whether Or Not They Have Adequately Controlled Their Users Data. As Commerce Secretary, Are You Looking At The Situation With Facebook In Any Way?
Ross: Well, We Are In The Sense That Commerce Department Administers The Privacy Shield, Which Is The Arrangement Between The European Commission And The United States. And Then A Separate One Between Switzerland And The United States. And I’m Happy To Report That We Have Over 2700 Companies Have Signed Up For The Privacy Shield With Europe And There Are Another 1500 Countries – Companies That Have Signed Up For The Privacy Shield Between The U.s. And Switzerland. We Are Very, Very Actively Trying To Protect People’s Right To Privacy And To The Appropriate Protection Of Their Personal Data. I’m Not Into The Intimate Details Of What Happened In Facebook. I’m Sure Those Will Be Brought Out In Excruciating Detail In The Coming Days.
Michelle Caruso-Cabrera: But Do You Believe There Is More Regulation Necessary For Companies Like Facebook?
Ross: Let’s First Find Out What The Actual Facts Are, What Actually Happened. Let’s See. I Think There Is Too Much Of A Rush To Judgment On Things In General. That’s Not To Say That I Don’t Think There Is Any Culpability On The Part Of Facebook, But I Think That We Need To Understand What’s Going On, How Did It Happen And How Do We Deal With It Going Forward. I Think Preventing Further Outbreaks Of It Is Really The Key.
Michelle Caruso-Cabrera: Mr. Secretary, Thank You So Much For Joining Us On This Important Day When It Comes To Trade.
Griffeth: Thank You.
Ross: Thank You Very Much For Having Me On.
Griffeth: I Did Have One More Question. What Did They Have For Dinner Last Night? What Did They Serve?
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