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Wilbur Ross speaks with Yahoo Finance [TRANSCRIPT]

Yahoo Finance
Associate Contributor

Below is Yahoo Finance’s interview with U.S. Commerce Secretary Wilbur Ross from the “All Markets Summit: America’s Financial Future.

ANDREW SERWER: Great to see you, Mr. Secretary. Please, have a seat.

WILBUR ROSS: Thank you.

ANDREW SERWER: So, we want to talk about tariffs and trade, but first I need to ask you a question about you.


ANDREW SERWER: And that– (LAUGH) and that is there have been news reports that have suggested that the president wants to replace you, possibly with– Linda McMahon from the Small Business Administration. Where does that stand? How secure is your job, Mr. Secretary?

WILBUR ROSS: Well, the– there is no stand. I’ll serve as long as the president wants and I have no indication to the contrary.

ANDREW SERWER: So, you haven’t talked to him about it recently?

WILBUR ROSS: I talked to him yesterday, but on trade issues.

ANDREW SERWER: Okay. Well, let’s go to trade issues then, shall we? And– I want to ask you about where things stand with regard to China, which of course is the front and center trade issue of our time. How do you assess– where we are and– and what inning are we in?

WILBUR ROSS: I– I think the concept of innings doesn’t really apply– (LAUGH) because it isn’t that neatly divided into little sub-compartments. We are where we are. And the president and President Xi had a very constructive conversation a couple of weeks ago. They will be meeting– in– at the G-20 in Argentina. And– the Chinese negotiator will probably be coming over here very shortly to start some informal talk.

ANDREW SERWER: How do you measure success when it comes to tariffs? I mean, when do you know we’ve won or we’ve lost?

WILBUR ROSS: Well, the issues with China are not just tariffs. The– if it were just tariffs, I think we could work it out very, very quickly. The real issue is intellectual property rights, forced technology transfers, s– espionage– industrial espionage, that kind of thing. We can’t tolerate abuses of that sort. We don’t mind them becoming much more technically advanced, getting into the newer technologies, but they have to do so in a legitimate fashion, not through these other practices.

ANDREW SERWER: Is that really the best way though, Mr. Secretary, to kind of link all those things together and try to force the Chinese to– mend their ways, if you will, on those issues by– putting the hammer down when it comes to trade?

WILBUR ROSS:  Well, what other weapons do we have?

ANDREW SERWER: Besides military, I guess, and we don’t want to resort to that.

WILBUR ROSS: Well, (LAUGH) I don’t think you’re proposing that we invade China over trade issues.

ANDREW SERWER: I’m not– to be clear. So– I’d also like to ask you– another question about trade in China, and that is investors, which is an important part of what we’re doing here today. And investors seem to be worried about the trade war with China, if it in fact is a trade war. That’s a whole nother (SIC) issue, whether– how to characterize it. Should investors be concerned about this?

WILBUR ROSS:  Well, investors always need to worry about whatever is a source of uncertainty. Businesses can deal with good news, they can deal with bad news; it’s very hard to deal with (NOISE) uncertainty. And I think whenever there is uncertainty, people become worried.

Also, the markets have had a tremendously big run– and so naturally that makes people a little bit jittery in and of– itself. But I think this is an administration of all, that you should judge by results, not by methodology, not by interim activities. Look at the recent deal with Korea. Look at the recent deal with Canada and Mexico. People had a lot of concerns while those were works in progress and I think people generally agree that they turned out very, very well. So, people just shouldn’t lose confidence simply because they’re afraid about the unknown.

ANDREW SERWER: Or be overly concerned by the president’s tweets?

WILBUR ROSS: Well, tweets are tweets. They’re a way that he communicates, and I– I think he does it very effectively.

Wilbur Ross

ANDREW SERWER: You mentioned Canada, and– and let’s talk about North America. I mean, is that resolved? Where– where does that stand?

WILBUR ROSS: Well, with– the plan is for the agreement to be signed by the three countries prior to December 1st, ’cause December 1st is when the president is inaugurated– in Mexico.


WILBUR ROSS: And– part of our understanding was this would be signed before that. Now, both countries, Canada and Mexico, as well as ourselves, have to go through their formal ratification process. In our case, it’s under the T.P.A., the so-called fast-track authority.

ANDREW SERWER: Right. When it comes to– to Asia and– the T.P.P.– is there any chance of the United States getting back into that? I mean, where do we stand with our partners in the Pacific– our trading partners in the Pacific?

WILBUR ROSS: Well– there’s been an announcement that we’re starting some discussions with Japan. Japan is the major one of those from a trade point of view. There’s no reason we also can’t have bilateral arrangements with others. The reason the president got out of the T.P.P. was not a lack of interest in Asia, and not a lack of interest in making trade deals there. Instead, it was that he didn’t like the specifics of the T.P.P.

ANDREW SERWER: Right. I mean, there’s sort of a philosophical– problem maybe with multilateral trade agreements, as opposed to bilateral?

WILBUR ROSS: Yeah, well, I think there are a couple of realities. Multilateral sounds wonderful, great big bang and bring a lot of people together, however what really happens, there are several things that are difficult. One is, let’s say you’re Japan and that person over there is Vietnam. (COUGH)

So, I go to you and I say, “We’d like some reformation of your agricultural policies.” And when you say, “Okay, but you must give me this in return,” then we go on to him and let’s say he’s Vietnam. We want something from him and he said, “Yes, but I want something else from you.” Now, each of you is gonna get the benefit of what the other negotiated even though you didn’t, yourself. Well, if you multiply that multiple times for ten or 12 partners–


WILBUR ROSS: –in a multilateral, you get chewed up pretty severely by the end of the process. So, that’s one problem. The second problem is it takes exponentially longer to do a multilateral agreement than to do a bilateral. Half these agreements are obsolete by the time they get signed.

So, the duration has another bad implication, and that is imagine if you spent eight years of your life trying to negotiate a trade agreement. Now you’re getting toward the end and there are a couple of sticking points. Are you really gonna want to go home and say to your– your loved one, “You know, dear, I just blew eight years of my life. We walked away from the agreement”? So, there becomes a– a psychological problem which makes people want to get the deal done, whether it’s good or bad.

ANDREW SERWER: I never thought about the psychology in relationships with regard to those trade agreements.

WILBUR ROSS: Well, negotiation of anything has a lot to do with psychology.

ANDREW SERWER: Does that mean that multilateral agreements are never good?

WILBUR ROSS: No. They can be good, it’s just we don’t see that there’s the overwhelming necessity to deal multilaterally rather than bilaterally. We just did a multilateral with Canada and Mexico, so obviously we don’t think it’s impossible.

ANDREW SERWER:  Mr. Secretary, I have to ask you about the controversy about the census question– the citizen controversy or the– the citizenship on the census. Two questions, why– one, why has your story about this been inconsistent? And–

WILBUR ROSS: Well, it has not been inconsistent.

ANDREW SERWER: Well, I guess–

WILBUR ROSS: The papers have interpreted it as being inconsistent.


WILBUR ROSS: There’s nothing inconsistent about it.

ANDREW SERWER: Okay, well, it’s– it– at one point, it was reported that you said it was the D.O.J.’s idea, and then it c– turned out apparently that it was your idea. And then you said–


ANDREW SERWER: –you didn’t talk to someone in the White House.

WILBUR ROSS: Well– you say apparently but actually (UNINTEL) we, ourselves, released that there had been a conversation with Steve Bannon, there had been– a conversation with Kovach. Those are natural and the– there was– in the air early in the administration, a whole bunch of questions about the census, so it was natural that there would be some limited discussions. But what triggered the investigation, the real study, what triggered the process that led to the determination to do it was the letter from the Department of Justice.

ANDREW SERWER: Okay. The whole issue of having that question in the census though, isn’t that really all about– providing an advantage to the Republican party? And if so, why not simply say it?

WILBUR ROSS: Well, first of all, it’s not. Your premise is wrong. Census had asked citizenship questions since about 1790. So, it’s– hardly a new idea.

ANDREW SERWER: Before the Republican Party was created? (LAUGHTER)

WILBUR ROSS: I think all parties were created back then.


WILBUR ROSS: In– in– in any event, it’s in the courts right now, so I think there’s a limit to how far it’s appropriate for us to discuss it. There is a tr– a case underway in New York as we sit here.

ANDREW SERWER: But– one last question on that. What is the point of that question– asking that question in the census?

WILBUR ROSS: The Justice Department requested that we ask the question in order to help them enforce the Voting Rights Act. That’s the genesis of the work.

ANDREW SERWER: Okay. Some people would disagree with that, but–

WILBUR ROSS: Well, it is a fact that the Justice Department wants it.

ANDREW SERWER: Okay, fair enough. Let me ask you about– your take on the economy then, shifting gears a little bit. Where do you think things stand? I mean, the markets seem kind of jittery right now, maybe concern that the expansion has run its course.

WILBUR ROSS: Well, I don’t see it. The most recent data that came out was strong. Job creation has been very strong. We have something like 7.1 million unfilled jobs and only six million unemployed people. That’s an incredible ratio and indeed is a problem, itself, because the limiting factors on economic growth are the following: expansion– demographic expansion of working-age population, workforce participation, and productivity.

You need to get all three of those to multiple against each other, and that’s what determines how fast you can grow as an economy. So, we need more workforce participation. It’s now at a point where something like a third of working-age people don’t have a job and don’t want one. They don’t regard themselves as being in the workforce.

That’s a far higher percentage than has been true before. We think a lot of that has to do to a skills mismatch. And that’s part of why Ivanka Trump is heading this big effort for worker training, for apprenticeships, for all sorts of activities to bridge the gap, because in many cases our educational system is neither preparing people through vocational training for the old economy, nor preparing students through science and math instruction for the new economy. So, the people have a very unfortunate problem in that there are good jobs available, but they don’t have the fundamental skill sets to achieve them. We’re gonna try to fix that.

ANDREW SERWER: Is that a part of what people are calling the income gap and the– the wealth gap? Does that contribute to that problem?

WILBUR ROSS: Oh, sure. I mean, if someone’s not even in the workforce, how do you make them wealthy? What– what is their prospect for advancement? You need people to be actively engaged in the workforce– to have any concept of inclusive capitalism work (?).

ANDREW SERWER: Getting back to the economy a little bit, and the markets and– and companies– two things. One, people have suggested that– the tax cut was a sugar high that– that has created a– a– a burst of activity that’s unsustainable, number one. And number two, we’re gonna be having tough comparisons with earnings going into 2019. Isn’t that going to be a drag on the– the economy and the markets, both of those things?

WILBUR ROSS: Well, corporate earnings certainly have been very, very strong. There’s no question about that. And it’s also no question that market’s job is to look ahead. What’s gonna happen next year or the year after, not just focus on what’s at– at the present. I think a lot will have to do with whether infrastructure gets the kind of treatment that it really deserves. As you know, the president is very keen to have an infrastructure program. And the real– only real issue is how do you pay for it. How much does the federal government do? How much d– is done by private sector?

ANDREW SERWER: But the infrastructure thing seems to always get bogged down with, oh, that project’s gonna go in a blue state or a red state. And it’s shocking to Americans that Congress can’t get this done.

WILBUR ROSS: Well– that kind of pork barrel stuff is shocking, not just to the public, shocking to everybody.

ANDREW SERWER: Right. Okay. Mr. Secretary, I also need to ask you– questions about these reported conflicts of interest. Yesterday– there was a report that the– the Democrats want to investigate– this and why you met with executives from Boeing and Chevron while you held stocks in those companies, and then later sold the stock. Is that the case? And why did you do that?

WILBUR ROSS: Well, all of my activities have been governed by the ethics rules. Every meeting that we have is screened by the Ethics Department. There’s no there there.

ANDREW SERWER: So, if the Democrats investigate, bring it on. Is that what you’re saying?

WILBUR ROSS: Well, they have– they will have subpoena powers, the heads of the committees. And if they subpoena, we’ll be responsive.

ANDREW SERWER: Okay. Let me ask you about traveling, because– you seem– you’ve done a lot of that recently. You’ve been in Europe. What have you seen over there?

WILBUR ROSS: Well, I was in– Brussels and had some very good discussions with the business community over there, and– and with government folks. Then– came back to go to Arizona. We had a big defense (UNINTEL) out there at the Air Force base. And then it went from there to Uzbekistan and Kazakhstan.

ANDREW SERWER: Okay. And what did you see in Uzbekistan and Kazakhstan? I mean–

WILBUR ROSS: Well, it– they– they were fascinating. Those are, as you know, former parts of the U.S.S.R. They are both living in a fairly dangerous territory in that one has China on one side, Russia on another, and Afghanistan on a third. The other one has mainly China and Russia.

So, they’re in a complicated geographic situation. But they are evolving toward more– capitalist economics from where they had been. The big trick for both of them, I think, is going to be forward integration. For example, they– they have a lot of oil and they export the oil, but they don’t have the refining capacity, so then they have to re-import refined product.

They grow a lot of cotton, very good cotton, (COUGH) but they don’t really make it into textile and apparel for export. Instead, they end up importing a lot of textiles and apparel. So, there are some structural changes that are needed as they devolve away from being kind of a colony of Russia to becoming freestanding, integrated economies.

ANDREW SERWER: And that process is ongoing?

WILBUR ROSS: Oh, it’s underway and there’s huge American investment– in them, most importantly in natural resources at the moment.

ANDREW SERWER: And you’re going to Texas–


ANDREW SERWER: –after this? What’s going on there?

WILBUR ROSS: To Corpus Christi. Cheniere is going to start some really big shipments overseas of LNG from its new processing facility– in Corpus Christi. That’ll be later on this week.

ANDREW SERWER: So, what– what drives you, Mr. Secretary? I mean, you don’t– you don’t need this headache. And– and I asked you some tough questions. There are people throwing slings and arrows at you and– and all that. And I just wonder– and– and by the way, you’re also kind of– a survivor in this administration, where there has been a fair amount of turnover. So, why keep at it?

WILBUR ROSS: Well– my mom was a third-grade school teacher at the public school that I attended when I was a kid. From there to here, the U.S. has been very good to me and now I’m in a position where I can afford to give something back to the country. Second, I worked very hard to get President Trump elected. Now I’d like to work equally hard to have him succeed and be re-elected.

ANDREW SERWER: What do you think the chances of him being re-elected are?

WILBUR ROSS: I think they’re fine. I think they’re fine. What president has done as much to the economy beneficially as this president? What president has– made so many more initiatives to make a fairer world, both in terms of sharing the burden of our military assistance to countries all around the world and in terms of trade? I mean, these are real landmark events that he’s embarking upon. No– no one that I can think of as a prior president has been as much an agent for constructive change as President Trump.

ANDREW SERWER: Well, it sounds like you want to stick around, the way you’re saying it like that. But– but– I– and final question, Mr. Secretary, doesn’t it just get tougher from here? I mean, the Democrats took the House and they have said they’re gonna come after you, they’re gonna come after the president, they’re gonna come after all manner of people. And the– the gridlock that’s going to happen, it– it doesn’t sound like a pretty picture for the next couple of years.

WILBUR ROSS: Well, even now– before the change in the House, if you look at the president’s accomplishments, they have importantly come in the form of proclamations and executive orders, other than tax and some of the regulatory reform. So, we haven’t been able to get that much through the Congress even before.

So, this is not necessarily a big change in that. It would be sad if we do get into a deliberate gridlock situation just because they don’t want to give the president a win. It’s one thing if you really disagree about a policy, but some of the statements that have been at least reported on in the press suggest an attitude, we just don’t want anything good to happen. That’s not a very constructive attitude. That’s really not why their constituents elected them. So, I hope that rhetoric will die down to something more sensible as they actually take office.

ANDREW SERWER: And the president’s mood right now? You say you’ve been talking to him?

WILBUR ROSS: He seemed fine yesterday.

ANDREW SERWER: Good enough. Why don’t we leave it at that?