Michael Pompeo: Is Destroying Huawei More Important Than A Trade Deal?

CNBC Transcript: United States Secretary of State Michael Pompeo Speaks with CNBC‘s “Squawk Box” Today

Michael Pompeo

Image source: CNBC Video Screenshot

WHEN: Today, Thursday, May 23, 2019

WHERE: CNBC’s “Squawk Box

The following is the unofficial transcript of a CNBC interview with United States Secretary of State Michael Pompeo on CNBC’s “Squawk Box” (M-F 6AM – 9AM) today, Thursday, May 23rd. The following is a link to video of the interview on CNBC.com:

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JOE KERNEN: Alright, let’s get right to this morning’s Squawk Newsmaker. Secretary of State Michael Pompeo, we want to welcome you, not only to the show, but welcome you in to Times Square, to our set. It’s so much better to have you here—

MICHAEL POMPEO: Great to be in New York City today with y’all.

JOE KERNEN: And normally if we have a Secretary of State on, we think diplomacy and foreign policy. Can you believe how much of what you do now is in CNBC’S domain, in terms of economics and money and oil and cyber security?

MICHAEL POMPEO: Joe, that’s a great point. I have very few meetings with foreign counterparts where we aren’t talking about important economic issues. Issues in trade relationships between our countries, a regulatory set of issues, all the things that drive economic growth. You all know, you can’t have a good national security for your nation, whether that’s the United States or another country, if you don’t have economic growth back home. It’s imperative.

JOE KERNEN: It’s a good place to be that we’re not talking necessarily about missiles aimed at us, although that’s still something I’m sure that you’re worried about. So, I was trying to figure out, do we start with Iran? Which unless it really deteriorates that probably is not as big an issue to the markets as what’s happening with China. So, I want to start with China and then we’ll get to Iran because it affects oil prices, et cetera. But, in terms of China, I know Steve Bannon is not part of the administration anymore, but just let me -- bear with me for a second. Destroying Huawei, according to Mr. Bannon, is ten times more important than striking an overall trade deal. And I thought that might be hyperbole, Andrew, until I looked in your paper today and I’m reading about -- no, I did -- and I’m reading about what’s happening with -- in the area where you have the --

ANDREW ROSS SORKIN: Yep.

JOE KERNEN: --the Uyghurs and these camps. They have set up a huge virtual cage of spying, which supposedly, and here is a quote from your newspaper, they’re arguing ‘that China is using technology to strengthen authoritarianism at home and abroad — and that the United States is the only country that can stop this.’ Authoritarianism. I mean, is Bannon overstating the issues here?

MICHAEL POMPEO: I’m going to say something that will surprise you. I think "The New York Times" has that story right. There is real risk. And you saw what President Trump has undertaken with respect to China. For too long, this is not partisan. Presidents from both parties had ignored the challenges that were presented to American workers, to American technology and to American national security that China presents. And he is pushing back in every element. The decision that was made to list Huawei had an enormous national security component to it. The company is deeply tied not only to China but to the Chinese Communist Party. And that connectivity, the existence of those connections, puts American information that crosses the networks at risk. I’ve spent a lot of time over the last months talking to our partners around the world, explaining to them why putting their citizens’ information, their citizen’s national security currents at risk by having that technology inside of their systems.

ANDREW ROSS SORKIN: Mr. Secretary, I don’t want to diminish the potential risk, can you help us— is there evidence that we can point to specifically today to suggest that there was spyware or other kinds of spying taking place using Huawei hardware?

MICHAEL POMPEO: Yeah. That’s the wrong question, Andrew. If you put your information, your information, in the hands of the Chinese Communist Party, it’s de facto a real risk to you. They may not use it today. They may not use it tomorrow.

ANDREW ROSS SORKIN: I don’t want to diminish the risk. I’m just raising the question because we’ve also heard from the CEO of Huawei who says, Look, we don’t share this information. We’re not working with the Chinese government. Point to something specific.

MICHAEL POMPEO: That’s just false. That’s just false. To say that they don’t work with the Chinese government is a false statement.

JOE KERNEN: There’s a law that they must work, if asked--

MICHAEL POMPEO: It is required to by Chinese law to do that. So, it’s just -- the Huawei CEO on that at least isn’t telling the American people the truth nor the world.

BECKY QUICK: We have seen already that some of the partners you mentioned about, some of other countries, have already started to take up and remove Huawei equipment or say that you can’t use it going forward. Several UK companies overnight and some Japanese companies as well. Do you expect us to see more of those companies in coming days or other countries?

MICHAEL POMPEO: We do. We have been working at the State Department to make sure that everyone understands the risk. It’s been really an educational mission as much as everything else. Every nation, every private company gets to make its over sovereign choices for the countries and private decisions for those entities. But as we share with them the risks, as we share with them the incapacity to mitigate those risks, which I think some thought could take place, as a technical matter, we don’t think there’s much mitigation opportunity, as we share that, we’re seeing them come to same understanding that the United States has come to.

BECKY QUICK: Do you think we eventually wind up with two internets, one based around China and its closest partners and one that is the western world?

MICHAEL POMPEO: I hope that’s not the case. We need a single place where information can be exchanged. But it has to be a system that has Western values embedded in it, with rule of law, property right protections, transparency, openness. It can’t be a system that is based on the principles of authoritarian communist regime.

ANDREW ROSS SORKIN: How do you think of Huawei as a chess piece, if you will, in this larger trade discussion and does it ultimately help us or hurt us? Meaning, does China look at this and say, ‘Okay they got us and therefore we’re going to now work with them in a better way’ or do you think they say to themselves, ‘You know what, they got us and we’re really not going to work with their companies now’?

MICHAEL POMPEO: So, remember there’s two pieces to this. There’s the national security component. And then there is what President Trump has been driving at to create a fair reciprocal balanced trade relationship between the two countries. I hope that we can keep those issues in their own place. We have an imperative to protect American national security. We have a need to make sure we get these trade rules right. I mean, you all know this. I come from Kansas. American workers in Kansas creating intellectual property, trying to grow their business, trying to take care of their families and the Chinese steal that information. That’s not right. We’re trying to fix that. They force companies that invest in China to create JVs with the sole intention of making sure the government has access to the information that comes across there. Those are the kinds of things that President Trump with Secretary Mnuchin and Ambassador Lighthizer are working on. And I hope they can come to an arrangement. If they do, it would be a good thing for China and the United States.

JOE KERNEN: But global 5G is not going to include Huawei. It’s not -- we will not -- is that our stated policy right now? That it’s not going to be Huawei?

MICHAEL POMPEO: We want the global 5G system, when it’s ultimately built out, to have a Western value set embedded in it.

JOE KERNEN: Well we’ve got to see—

MICHAEL POMPEO: Not just American technology. Technology, it will come from Europe, it will come from other parts of Asia. This is a global forum and our requirement is that this technology creates trusted networks. And if we have trusted networks, as you described, we can have a single system which will benefit the world.

JOE KERNEN: That’s not just a small chess piece, Andrew. That’s not a pawn.

ANDREW ROSS SORKIN: No, it’s a big piece.

JOE KERNEN: That’s at least a ruck, maybe a queen. Right?

ANDREW ROSS SORKIN: Why do you think we –

JOE KERNEN: I mean--

MICHAEL POMPEO: A bishop or a ruck for sure.

JOE KERNEN: Yeah.

ANDREW ROSS SORKIN: Why do you think we have not led on 5G? Why has Huawei been able to get as far ahead as it has and we don’t have a company that’s been able to build the micro cells and some of the other devices that they have created?

MICHAEL POMPEO: It’s an important question because we need to make sure that it’s fixed going forward. So, it’s not just a rear-view mirror ‘Why didn’t we get there?’ but how is it the case that we are going to ensure that there are Western alternatives to Huawei. You know, I think there’s lots of pieces to it. One of which is: if you’re a state-directed business and you take on subsidies from the Chinese government, there is no doubt you can make real hay when you show up not only with a low cost, affordable product but engage in behavior that the Foreign Corrupt Practices Act would prevent— yeah, you can get a little bit of foothold. I am convinced that the West will ultimately prevail because I think the world wants systems that they can trust.

JOE KERNEN: What are the prospects for us actually getting a deal that has teeth given that so much is at stake for the way the Chinese operate now? They would need to be dragged kicking and screaming into an agreement. Either it’s a lukewarm agreement or it’s going to take years and years and years. Are you pessimistic?

MICHAEL POMPEO: Joe, I don’t know the answer to that. I’ve spoken to Secretary Mnuchin almost every day as they have been part of these discussions. I haven’t been at the center of the actual negotiations. I have seen them make real progress. I hope they can continue to make it. These issues are not only important to the United States, we remind people: these are good for the world and good for the people of China. If we get this right, this will create a trading system that can continue to create prosperity for citizens all across the world.

BECKY QUICK: Secretary Pompeo, can I just ask you: if you have been in touch with Steven Mnuchin almost every day, you have seen him make progress, but recently has there been a more downbeat sort of outlook on what happens? Because that is what the market seems to think.

MICHAEL POMPEO: I think he said yesterday they don’t have any meetings scheduled for him to travel to China. I hope that by the time the show ends this morning that they’re back at it. It’s important for the conversation to continue. It’s important for both of our nations to try to get this right. It’s tough, Joe to your point. The things that -- the changes, the transitions that we’re asking China to make, to create these fair, reciprocal trading rules is no doubt a big ask. But it’s important for the United States and President Trump is firmly committed to it.

JOE KERNEN: I briefly mentioned the Chinese ambassador. Was he -- was that for a U.S. audience or I mean is that really --

BECKY QUICK: Or for a Chinese audience.

JOE KERNEN: Or was that really the policy positions? I mean, I watched him say that there’s been no military buildup in the South China Sea on any of the islands. I watched him say that everybody knows Huawei is just a private corporation, it has nothing to do -- I watched him say that the internment camps are jobs training for the Uyghurs. I watched him say that everything they decided on, that the United States had pulled out three or four times and taken back what they had -- I mean, it was --

MICHAEL POMPEO: Yeah.

JOE KERNEN: Maybe Baghdad Bob is too strong. But that was the feeling I got listening to some – and if that’s what we’re hearing from the negotiators in the trade talks, I don’t see it going anywhere ever.

MICHAEL POMPEO: Yeah. The Chinese are building up in the South China Sea.

JOE KERNEN: That’s a fact.

MICHAEL POMPEO: The authoritarian nature of what’s taking place in Xinjiang to the Uyghurs, some million people held in camps, these are not community colleges. These are authoritarian reeducation institutions. And we have seen what’s going on in the technology space. Those are facts. I can’t account for why the Chinese Ambassador said these –

JOE KERNEN: They’ve criticized you overtly, too, in saying certain things. Have they not?

MICHAEL POMPEO: I’m sure they have.

JOE KERNEN: They may be watching this and they’re going to be mad that I said Baghdad Bob. But it just--

MICHAEL POMPEO: What’s important, Joe -- what’s important, Joe, it’s not name calling. It’s important to be honest, get the facts right and then ensure that our nation protects its interest. And President Trump has done that at every turn.

JOE KERNEN: And he, you know, again referencing some people that know him, they are saying he’s not going to back down. He’s going to listen to Chuck Schumer and not going to back down on this. Is that--

MICHAEL POMPEO: President Trump has made clear his expectations for how the United States will behave.

JOE KERNEN: There’s not an S&P, Standard & Poor's, 500 level where we decide to start talking more?

MICHAEL POMPEO: These are important commercial -- long-term commercial economic interests of the United States and national security interests. President Trump understands them.

JOE KERNEN: We could go until 9:00 talking about China. We should mention Iran. What is the latest there in terms of – you have, on record, saying we have plenty of oil. We have partners that will make up for any disruptions that we see from Iran. In recent days, have you seen them pull back on some of the more bellicose moves they made? Whether it’s the bomb near the embassy, or the -- and we don’t know it’s them for sure, with the ships. But it certainly looks like them.

MICHAEL POMPEO: This threat, this threat from Iran remains. We have had some luck in disrupting some of the tactical things that were in front of us, I think it’s fair to say. But make sure we’re still on high alert. We’re still making sure we have the right resources in play. Your point, I remember when we began the Maximum Pressure Campaign there was talk, probably on this show, of oil going to 150. Your listeners should all know that when May 2nd came and we withdrew from the JCPoA, oil is now well below that. I think I saw Brent crude at 69 something when I walked in here this morning. It’s below where it was when we designated the IRGA a terrorist organization. We are confident that we have done the hard work to make sure that the market is well supplied. And I hope that we can continue to maintain that. I think that we can.

JOE KERNEN: You have no problem saying unequivocally that this wasn’t hyped by the administration for political purposes? The Democrats are sort of sounding that alarm.

MICHAEL POMPEO: None. No overhype. And we briefed Congress extensively Tuesday of this week, I think almost every member, Democrats and Republicans alike, walked out of that room understanding that the threats that we were discussing and the decision that President Trump made to talk a posture to deter those threats and to protect our forces were wholly justified and reasonable.

JOE KERNEN: You and Bolton are on the same page?

MICHAEL POMPEO: Yes

JOE KERNEN: Yes.

MICHAEL POMPEO: Yes.

JOE KERNEN: Nothing going on there? Nothing to any of those stories? Politico--

MICHAEL POMPEO: Look how these – these stories are crazy. Every senior leader in the United States government will have a different view on something and they’ll make their case where none of us are wallflowers. President Trump wouldn’t want a wallflower in his administration. He wants people voicing their views base on the facts they see them. John does that. I do that. There are days when we don’t agree perfectly, but John and I, from a policy perspective, and as we stare at the risk to the world, are in nearly complete alignment.

BECKY QUICK: Although, the stories suggest that you’re in favor of negotiating and he’s in favor of not negotiating, not believing. Those are pretty important differentiations.

MICHAEL POMPEO: You’re talking about Iran?

BECKY QUICK: Yes.

MICHAEL POMPEO: Well, the President has made clear that at the right time negotiations are important. Now, what John and I think is interesting, what the President says is important, and the President has said that he’s prepared, at the right time, when the Iranians conclude it’s in their best interests to negotiate, we stand ready to take their call.

ANDREW ROSS SORKIN: I wanted to ask you one question. Your predecessor, Rex Tillerson, was in Washington apparently in the past two days. There was a report that he was interviewed by some Congressmen and was asked about the President, this is President Trump’s values, and he said that he, meaning Rex Tillerson, was guided by, quote, American values, such as democracy and freedom. But that he could not offer the same assessment for the President. What do you make of that comment?

MICHAEL POMPEO: It’s pretty outrageous and it probably explains why Rex Tillerson is no longer the Secretary of State.

JOE KERNEN: John Kerry is no longer the Secretary of State.

MICHAEL POMPEO: Yeah, no, we have lots of folks still hanging around.

JOE KERNEN: Do you feel confident you’re the only one speaking for -- with Iran’s leaders at this point? Is there a cease and desist order there? I mean, now I hear they’re waiting for 2020. China is waiting for -- everybody is waiting for 2020 before we do anything, it seems like.

MICHAEL POMPEO: Sadly, I’m not confident that we don’t have others out trying to speak on behalf of the United States, working against President Trump’s policies. I wish I could say I’m confident of that. I’m not. I’ve seen – I saw Secretary Kerry travel to Munich. There’s a security conference every year. He was with Ernest Moniz, Wendy Sherman, and the whole gang that put in place the JCPoA which fundamentally failed America. It’s what we’re working to correct today. No, I’m not confident we’re in that place. And I hope -- here is my assurance to you all, when I’m done being Secretary of State, I’ll get off the stage.

JOE KERNEN: You see how well this dynamic works. He’ll ask the Tillerson questions, I’ll ask the John Kerry questions. We cover the entire spectrum. Right, Mr. Secretary?

MICHAEL POMPEO: I love predictability.

JOE KERNEN: Exactly.

ANDREW ROSS SORKIN: Mr. Secretary, thank you.

MICHAEL POMPEO: Thank you.

JOE KERNEN: We appreciate it very much.




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver