CNBC News Releases



WHEN: Today, Thursday, May 10th

WHERE: CNBC's Capital Exchange event in Washington D.C.

Following is the unofficial transcript of CNBC's Tyler Mathisen's sit down interview with Wilbur Ross, United States Secretary of Commerce, today at CNBC's new Capital Exchange event in Washington D.C.

All references must be sourced to CNBC's Capital Exchange.

TYLER MATHISEN: A lot of my friends at-- CNBC know that I am a big fan of the play Hamilton. I don't know how many of seen it. If you have not seen it, I urge you to do it. It is worth every penny of the inflated price you will pay. In that-- in that play, there is a song and it is a rousing song called The Room Where It Happen. And it's Aaron Burr's plea to be engaged and involved. Our next guest is in the room where it happens on a host of-- critical issues. Whether it is NAFTA, whether it is China trade, whether it is-- the reimposition of sanctions against Iran. Secretary Wilbur Ross, the 39th Commerce Secretary of the United States is in the room where it happens. He came to Washington after a 55-year career in business. And we are grateful-- to have him here today. And grateful for your service to the country. Wilbur Ross. Thank you. Please have a seat. Well, we're delighted you can join us today. And there's a lot to cover and we'll do it quickly. But I-- I guess I-- I'm really curious, after your career in business, how has the transition been to working in Washington? What has surprised you? What has pleased you? What has disappointed you?

SECRETARY WILBUR ROSS: Okay. Well, I don't speak-- I don't speak hip-hop, so I can't really do Hamilton very well. Most interesting things are one, the currency is different. In Wall Street, the currency is mostly money. That's the motivator. Here the pay structure is not a big triangle like you have in business. It's more of a -- wide trapezoid kind of a thing. So it's not very much pay differentiation. That means titles are very, very important. And heaven help you if you get wrung the title of the Third Assistant to the Fourth Deputy to the Undersecretary. It's really important.

TYLER MATHISEN: Titles are currency--

SECRETARY WILBUR ROSS: To-- to get that. Right. Second thing though that's very encouraging-- within this mass bureaucracy there's a good middle tier of people who are very, very strong technically. Very devoted. Not particularly ideological. And despite the lack of compensation, perfectly willing to work 7:00 at night, 8:00 at night, work weekends. Really work hard. Just as hard as on Wall Street. And that surprised me quite a bit. Was-- I had a different image of the bureaucrat. Third thing is Washington is a very, very habitable place. Tyler, you grew up here--

TYLER MATHISEN: Certainly is.

SECRETARY WILBUR ROSS: You know that it's a people-scale city. But it's really quite an attractive place to live. And that was the thing I had no idea about. But am very happy with the outcome.

TYLER MATHISEN: You know, people have characterized Washington because it was built on a swamp as a swamp. The president was hardly the first to do it. Certainly, this week when we hear of payments to a former close associate-- attorney for the president in-- totaling more than a million dollars, they-- they say, that represents the swamp. Do you see Washington as a swamp? Is it in any sense getting drained if it is?

SECRETARY WILBUR ROSS: W-- well, yeah, and first of all, there are m-- lot more alligators than there are swamp in Washington. And a lot of them--

TYLER MATHISEN: What do you mean?

SECRETARY WILBUR ROSS: --are-- are the kinds of people who would be paying money to someone like Michael Cohen for some real or imagined access. Or real imagined intuition into what the president was thinking. But there's a lot m-- a lot of that that goes on. Sometimes I think the main role of the lobbyist is to arrange meetings. They-- they seem very happy if they can get a meeting. Al-- almost independently of the outcome.

TYLER MATHISEN: There is probably no one in the administration who has more experience in Asia dealing with the economies over there, with the business people over there, with government officials over there. And you have had one hell of a week. You traveled 30 hours to go to China and negotiate our bilateral trade arrangements with them. You spent 30 hours negotiating. You spent 30 hours flying back. And I even hear from a little birdie that you were sighted in New York over the weekend. So you are a man in motion. You went to China, expressing to David Faber last week on CNBC, some hopefulness about progress. What progress made?

SECRETARY WILBUR ROSS: Well, it's hard-- depends how you measure progress. Progress was made in that the Chinese had said publically that prior to the trip, they weren't 100% sure of what our objectives were. So we sent them prior to our arrival quite a detailed multi-page document covering everything that, at least we can imagine. And by the time we actually got there, they had prepared a written response to it. So that was good in that there was a very specific exchange. It wasn't just blah, blah, blah, blah, blah, blah. It was-- into very precise things. It was--

TYLER MATHISEN: That framework was very detailed. And I would say, very frank.


TYLER MATHISEN: It was-- nothing was held back.

SECRETARY WILBUR ROSS: Nothing that we could think of, that's for sure.


SECRETARY WILBUR ROSS: It was a high-level delegation. It was led by the Vice Premier. Had the Minister of Finance, the-- Minister of Commerce, the Governor of the PBOC. Had that level of people. People from MOFCOM. So it was the right level of people. And then on the back tier, on either side, were the -- sort of, support of people. So right level people. Very extreme attention to detail. There's a gap. There's a considerable gap between what they've put on the table and what we feel we need. But that's okay. You'd-- you'd sort of expect that at this stage in the game. Real question now comes just when will the follow-up be? What form will that take? How much closure will we get? What will turn out to be the really sticky issues?

TYLER MATHISEN: I hear that Vice Premier-- he is-- is coming to Washington-- soon. I assume you'll meet with him--


TYLER MATHISEN: Be in the room where it happens--


TYLER MATHISEN: Let's talk about a couple of the-- the topics that were addressed in that framework memo-- and-- and certainly are-- are hanging out there. And that is the matter of the bilateral trade deficit which is.


TYLER MATHISEN: However, you measure it, 400 billion or thereabouts. The administration has said that they want to-- that-- that you guys want to reduce that trade deficit by-- what is it? 100 billion, 200 billion by 2020. How did the Chinese react to that in particular? Because it is a sticking point.

SECRETARY WILBUR ROSS: No, I think they agreed to the concept of the trade deficit reduction. The questions are more how much and how do you get there? Our-- our approach has been to request individual products on which we can sell more to them than we're selling now. As opposed to them selling less to us. The-- us selling more to them has more bang for the buck for our economy to begin with. And is probably less intrusive into their economy in that-- take for example, soybeans. We supply them with about a third of their soybean-- import needs. Brazil is around 50%. So between the two of us -- we're most of it. But if our 30% went to 35 or 40 or 45, and it came out of somewhere else, that would be a very interesting dynamic.

TYLER MATHISEN: Do you sense that they are going-- when-- when the Chinese come that they are going to come with a list of products that they are open to having us sell more of in their domestic market? And will that-- will that do the trick? Is that enough--


TYLER MATHISEN: On trade? And then we'll get to intellectual property in a second.

SECRETARY WILBUR ROSS: Well, it certainly could do the trick on trade. Because they're a huge consumption market. Our-- our share of it is not that enormous. And so there's no question we could close the gap on trade if they wish to.

TYLER MATHISEN: Let's talk a little bit about trade deficits. And-- and-- and quickly have you address-- a question which is, there's a high focus on the-- on the bilateral trade deficit with China. And some economists say that is relevant, others say it is more-- and-- and-- and is a reflection of bad behavior in part-- on the part of the Chinese. But others say it is more of a reflection of the fact that we spend more than we produce. Quick thought on how relevant trade deficits are. And whether tariffs, such as under section 232, are the way to address those bilateral issues?

SECRETARY WILBUR ROSS: Okay. Well, there are really three questions.

TYLER MATHISEN: That's what I excel at. Asking three questions in one. And you gotta unpack 'em.

SECRETARY WILBUR ROSS: First of all, why do deficits matter? There are good deficits and bad deficits. There are natural ones and unnatural ones. A natural one would be for many, many years we have not been self-sufficient in petroleum. So to me that's not a blameful deficit. It's a question of from which country would we buy it. So if we bought it all from one country, that would make that deficit look very big. But what's the difference if you bought it from two others or from the one? But there are a lot of blameful deficits. And those are the ones that come from-- too high tariff barriers, too high non-tariff trade barriers. And an awful lot of it is that. The-- the Chinese are very good at the rhetoric of free trade. But in fact, they are probably the most protectionist country of the major countries. So that part there's no inherent reason for. The economists use this term "comparative advantage". A big high tariff sh-- is not really a comparative advantage. That's a willful act to destroy trade. The second part, the question about savings, investment, and trade deficits. If you look at charts and if this was set up differently, I had a chart I was going to show. If you chart our savings pattern, our investment pattern, and then deficit patterns, you'll see that if savings and investment are the real reason, they must have somehow miraculously known to change just as China entered the World Trade Organization. And they must've somehow known exactly how to change just as we made NAFTA. I don't think the math really--


SECRETARY WILBUR ROSS: --follows that. So I just think you should look at the empirical evidence. Run your own chart and you'll see these enormous spikes at specific events. On a smaller scale with Korea. Korea-- deficit was going like here. We enter into KORUS, suddenly it doubles in a couple of year period. That's not a function of radical change in U.S. savings and investment pattern. Now if you talk really broadly and over really long time periods, clearly, the both sides have to add up to the same. It's like m-- double entry bookkeeping.


SECRETARY WILBUR ROSS: Both sides have to balance. Question those causality and question is immediacy.

TYLER MATHISEN: The other key issue here-- is-- it-- between the United States and China-- or one of the other key issues is-- intellectual property theft--

TYLER MATHISEN: Ab-- absolutely--

TYLER MATHISEN: --intellectual-- intellectual property protections. Under section 301 we can take action against them or have. How r-- respect-- res-- receptive were they? That was part of the framework memo that you sent over. How res-- receptive were they to the idea of enhancing-- protections on intellectual property? Not insisting so much on-- technology sharing when you go in and do business. You have to share your technology with. Are they open to that? And how would you ever verify that they were sticking to an agreement?

SECRETARY WILBUR ROSS: Well, China's stated position for quite a while has been there are no forced technology transfers. They don't require it to happen. And if we could get a company there that had been forced to do it to come forward, they would deal with it. Well, the practical problem with that is the individual companies worry about retaliation. So it's a question that has its own answer within it. It'll be hard to measure. But not as hard as you would think. Because the companies who are involved do know what's happened.

TYLER MATHISEN: Let's talk a little bit about the second 232. I don't mean to get in-- too deep into the weeds here, but those are the tariffs on steel and aluminum. A waver was given to certain-- countries in the European Union-- extending the time-- to-- to discuss-- possible remedies. But that has a sunset moment.


TYLER MATHISEN: I believe it is June 1st.


TYLER MATHISEN: W-- w-- w-- do you expect that on June 1st-- the tariffs will be applied? Or will there be another extension of the deadline with respect to the E.U. or other countries like Argentina, Brazil, and so forth?

SECRETARY WILBUR ROSS: Well, first, let me put them in perspective. The 232s and the 301s fit a mosaic. The 232s, the steel and aluminum, that's the world as it exists today. So we're trying to correct anomalies in it. The 301 on intellectual property, that's the world of the future. We have to protect that. So there's-- a fitting-- between the two. And on the 301, in the month of June, the U.S. Patent Office which is part of the Department of Commerce, will issues its 10 millionth patent. That's an incredible figure. There's no country in the history of the world that has ever issued anything like 10 million patents. And that's a very visual demonstration as to why intellectual property is uniquely important-- to us. On-- on the 232s, the reason we went with a very broad brush. I think it's 160 countries are affected by it.

TYLER MATHISEN: On steel and aluminum.



SECRETARY WILBUR ROSS: Some of whom don't even really ship much of anything to us now. The reason we had to do that is we brought successfully some 424 trade actions against various products from various countries. And under the WTO rules, those actions have to be very precise. So many millimeters of thickness from such and such a country. So they're very narrow in scope. And the practical significance of that is they're easy to get around. They'll change the dimension a little bit. Now it's a new product--

TYLER MATHISEN: Hmmmm. Uh-huh--

SECRETARY WILBUR ROSS: Or they'll add a flange or something--


SECRETARY WILBUR ROSS: Or they'll ship it through a third party country with or without some little bit of additional processing. So we have to cast the net very wide even though the vast majority of those countries have not very much to do with the steel or aluminum--

TYLER MATHISEN: So-- so back to the idea of-- of an extension in the deadline. Do you think that the June 1 deadline will be extended again? Or will there be a resolution? Or will the E.U. be subject to the tariffs?

SECRETARY WILBUR ROSS: Well, it depends on how the negotiations work out. The--

TYLER MATHISEN: You've seen progress--

SECRETARY WILBUR ROSS: S-- several of the countries we've already worked things out.

TYLER MATHISEN: Right. With quotas and--

SECRETARY WILBUR ROSS: And the paperwork is pretty well finished. O-- others like the E.U.--still a work in progress. NAFTA, as you know, it's woven into the whole NAFTA framework. The president is not a man of great patience. And so I-- I wouldn't count on further extensions.

TYLER MATHISEN: Let's talk about NAFTA. You and the administration have taken on a lot of tough issues. China trade, NAFTA, Iran, North Korea. I can't imagine all of this having happened but for the guy who sits across the street--


TYLER MATHISEN: I mean, it-- it is consequential. Let's talk about NAFTA. How much progress has been made? What are the remaining sticking points? And are you hopeful that a NAFTA 2.0 will get done? And if so, how soon?

SECRETARY WILBUR ROSS: Well, as to the timing is probably the easier part of it. There's no specific deadline, but there's a political calendar that's beginning to encroach on the negotiations. And that consists of the Canadian provincial elections are in June. The Mexican presidential elections beginning of July. And our midterm elections in November. So once we get a few weeks beyond where we are now, political calendar will make it extremely difficult to do anything immediately. So it'll either happen very quickly or be pushed over beyond these various elections. And in that case, who knows what the cast of characters will be like when-- when we come back in--

TYLER MATHISEN: What are the sticking points? There's been encouraging signs that-- that a deal may indeed get done very quickly-- is eminent. What-- what are the remaining points of contention to the extend you can--


TYLER MATHISEN: --speak of them.

SECRETARY WILBUR ROSS: Well, they are quite a few. The-- first of all, NAFTA-- the original NAFTA was something like 2,500 pages. So there are lots of little chapters in it. I would say a little under half of the total chapters have been quite resolved, down to the last semicolon. The other half we're at various stages of evolution. In many of them, there's more or less agreement in principle and the outline. And now it's translating them into detail. But ones that have been well-publicized as contentious, rules of origin, dispute resolution mechanisms, labor, sunset-- are among not the total sum of the tough ones, but those are --

TYLER MATHISEN: But when you rules of origin, you're talking about content-- and-- and the source of the content--


TYLER MATHISEN: --in an automobile, for example.


TYLER MATHISEN: So-- so i-- it is a difficult needle to thread. Because the administration could reach agreement with Canada and Mexico, but then it has to go up the street.


TYLER MATHISEN: And the original NAFTA was no slam dunk.


TYLER MATHISEN: If you get a deal or you're confident you can get it through congress and what happens if you can't?

SECRETARY WILBUR ROSS: Well-- we-- we think there's no doubt you can get through Congress because we believe that if we do make a deal, it will be demonstrably better for the U.S. economy than what we have right now. And if we're right in that presumption, shouldn't be that hard even with the partisan nature of Congress today. Shouldn't be that hard to get it through.

TYLER MATHISEN: So you're hopeful on that?


TYLER MATHISEN: Because there are GOP people who don't love it. And there are Democrats who don't love it.

SECRETARY WILBUR ROSS: Right. But we've been living with that for a little while now.

TYLER MATHISEN: Yeah. That's true. Yeah. And when you said, partisan nature of the Capitol, I-- I can't-- what are you talking about? Let's go to the audience for some questions with the time we have remaining, because Secretary-- Ross has to go up to Capitol Hill where he is going to-- testify in front of the appropriations committee. That is the big fundraising event, right? Is that basically that--

SECRETARY WILBUR ROSS: Yes. We're-- we're working-- we're working now on the 2019 appropriations.

TYLER MATHISEN: This-- young lady here has a question. Why don't we go there first?

CONTESSA BOURBON: Hi, my name is Contessa Bourbon from the Wall Street Journal and London Times. I'd like to ask, how many U.S. companies applied and approve that products they imported be excluded from new tariffs from steel and aluminum imports? How are the tariffs impacting American industries?

SECRETARY WILBUR ROSS: Okay. Thank-- think that the question was how are the tariffs affected American business. Is that the gist of the question?

CONTESSA BOURBON: And the number of companies.

SECRETARY WILBUR ROSS: I-- I can't hear her.

TYLER MATHISEN: The number of companies that have applied for exemptions to the tariffs--

SECRETARY WILBUR ROSS: Oh yes. The-- I don't remember how many companies, but there have been some 7,000 individual product requests made. One individual company--imagine it--put in requests for 1,167 products. Which is hard to imagine that there really 1,167 products consumed by that company that are in short supply in the U.S. So I think there's been a little bit of gaming-- of the system. But it's some 7,000-- have been put in. And you'll start seeing probably this week or next, them coming back out. Because there's a 30 day notice period, public comment period. There's a whole typical government process. So it takes more or less 90 days from when their m-- application has been put up on the website to the time when there is a determination of it.

TYLER MATHISEN: Another question. There must be one. Please.

KELLY GROH: Hi, Secretary Ross. This is Kelly Groh with Genworth. I've got a question on China. And they have recently opened up investment beyond the 49% for things like autos and financial services. But I haven't seen a lot of China deals being approved through the Committee on Foreign Investment in the U.S. recently. You know, what's your take on that?

SECRETARY WILBUR ROSS: Well, under CFIUS-- we do look at-- any foreign acquisition. And in fact, CFIUS is about to be tightened. There-- there's some legislation-- pending right now on it. But in reality, the only things that we truly restrict are militarily sensitive things or dual use things. Things that maybe have a commercial use but also have a military use. Other than that, we're-- we're quite wide open. Whether it's Chinese investment or it's any other-- kind of investment. The-- I think that answers your question.

TYLER MATHISEN: Is there another quick question on this side of the room perhaps? Anybody else? Oh, please, yes. You want to just shout it out? Stand and shout.

AUDIENCE MEMBER: Mr. Secretary, John--


AUDIENCE MEMBER: Question about the dispute resolution. Can you tell us a little more about where you think that's gonna end up?

TYLER MATHISEN: Question's about the dispute resolution under NAFTA.

SECRETARY WILBUR ROSS: Well, if I knew where it would end up, it would have ended up already. So that's a little bit hard. W-- we are unhappy with the existing format-- which is very complicated thing of picking panels and what country they come from and all that. It-- the other two countries seem more comfortable with the existing thing than we do. And that sort of confirms why we're uncomfortable with it. But where we'll end up-- we'll know pretty soon.

TYLER MATHISEN: And my final question will be about Iran. I realize that the reimposition of sanctions, should that take place, is largely directed out of the Treasury Department. But certainly--


TYLER MATHISEN: Bears on-- U.S. businesses with which-- you are most intimately-- in-- involved. And I think at this point, Europe is particularly worried about how the United States may approach European business-- that-- that may want to try and continue to do business with Iran. Give us a quick thought about that. How American companies may be affected. I gather there were some that were trying to do business with Iran, but a lot of those deals had not gone very far at all.

SECRETARY WILBUR ROSS: Europe is-- has far more f-- exposure to Iran than we do. Both historically, more recently, and prospectively. Iran has not been-- a big target for-- American companies. Few, but not-- not really very much. Europe-- France, especially, has always had a close relationship with Iran. So the-- they're more upset because it's more relevant to them. One of their car companies recently announced it was going to open a factory there. Well, the-- the problem is, because of our importance in the monetary system, when we put sanctions on, it's very hard for companies to do business with them. That's, I think, a big part of the reason why we're having some success with North Korea. Those sanctions really began to bite.

TYLER MATHISEN: And on North Korea, I think we can all applaud, and I think we should, the release of three prisoners today--


TYLER MATHISEN: How about a round of applause for Secretary Ross? Thank you so much.


TYLER MATHISEN: That was really fun. I really enjoyed it. I really did--

SECRETARY WILBUR ROSS: Thank you, Tyler. Thank you--

TYLER MATHISEN: And-- and I want to-- particular thank him for taking my four-part questions. That was really good. I know--


TYLER MATHISEN: No, you did not. Now I know you have to go, so I'm gonna-- let you do that because you have to go up to the Hill.


TYLER MATHISEN: One more time for Secretary Wilbur Ross. Thank you so much.


TYLER MATHISEN: I really appreciate it.