WHEN: Today, Tuesday, May 14, 2019
WHERE: CNBC's "Squawk Alley"
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Senator Marco Rubio on CNBC's "Squawk Alley" (M-F 11AM – 12PM) today, Tuesday, May 14th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2019/05/14/senator-marco-rubio-trump-doing-right-thing-on-trade.html.
All references must be sourced to CNBC.
MORGAN BRENNAN: Well, joining us now from Capitol Hill, Florida Republican Senator Marco Rubio, who is also out with a new op-ed calling on U.S. companies and lawmakers to increase capital investment to keep America competitive. Senator, thank you for joining us today.
MARCO RUBIO: Thank you. Thank you.
MORGAN BRENNAN: So, before we get into your op-ed, I just want to get your reaction to these comments from the President just a few minutes ago. This idea that the trade dispute is a little squabble, that talks have not collapsed. How do you see it?
MARCO RUBIO: Well, I don't think talks have collapsed. Ultimately, I do think both sides will have to talk. But I think he's doing the right thing. Look, we have no choice but to address this China imbalance that exists, at large in our relationship, but particularly when it comes to trade. And we have to deal with it now. This only gets harder from here. And, I give the President credit. Look, the easiest thing for him to do in the short-term is leave the status quo in place or cut some fake deal and the stock market will perform well and in the short-term, we'll have good results from it. But in the long-term, it continues to chip away at the underpinnings of our economy, at the structure of our economy, and will ultimately leave us in a worse place. This existing relationship between China and the U.S., on a number of issues, particularly on trade and on the industry, is out of balance. And If we don't balance it and balance it soon, the long-term ramifications to the country aren't going to be harmful, they are going to be catastrophic and they are going to devastating.
MORGAN BRENNAN: Yeah, Senator, we've seen quite a number of administrations over the years try and address these issues or at least some of these issues with China. Some have failed and some have maybe made a little bit of headway in specific areas of specific industries. But looking at the situation more broadly right now, and the fact that, as you basically put it, we're at this precipice, are tariffs the right way to move forward right now?
MARCO RUBIO: No, ideally you wouldn't have tariffs. But I would argue that we are -- we already face tariffs, we already face all kinds of impediments to access to their marketplace. Then, you add to that their subsidization of these industries that they're trying to make global champions, and then you add to that, the fact that they force the transfer of intellectual property, and if they can't force you to transfer it, they steal it from you. So, we already have a series of hundreds of billions of dollars of Chinese penalties against the United States which are threatening our long-term viability. We are losing our capacity as a nation to lead in the critical industries of the 21st century and that will redefine the century. Ten or fifteen years from now this debate will be nonexistent because it will be over and they'll dominate these important fields. This is probably the last time we have to address it.
JON FORTT: So, Senator, what if this tough tactic doesn't work? You say if we don't balance this relationship soon, it could be bad. But what if it stays this way and the tariffs have to remain in place. Will you be satisfied with that?
MARCO RUBIO: No, that's not the ideal outcome, but ultimately what will end up happening is the American consumer market is important enough that you're going to begin to see and are already seeing a number of companies decoupling from the Chinese economy, looking for other places to move their production to avoid this sort of situation. Eventually, the markets will respond to this by moving their productive capacity to places where they aren't facing these impediments. Or you're going to see it will be cost effective to go into the domestic production of these goods here in the United States. It depends on the industry. But, ultimately, I would love to see a world in which the U.S. and China get along and have a fair relationship. But to allow this imbalance to continue is dangerous. It's dangerous for the global peace and security. Eventually, this unbalanced relationship between the U.S. and China will lead them to take aggressive measures both economically and potentially militarily. The U.S. will have to respond. And then we're going to have a real conflict. And a devastating one at that. We've got to bring symmetry and balance back to this relationship for the sake of global stability and peace.
MORGAN BRENNAN: Yeah. It's certainly a conversation I've had with quite a number of people in the Pentagon, this concern about what this could mean longer term over the coming decades, this dynamic between the U.S. and China. You published an op-ed today, focused on this need to invest in America again. The last line I think of the op-ed sums it up, "If we do not change our public policies to reflect long-term investment as a priority, we will not be able to compete globally or build the America our values demand." What are you proposing and how crucial is it to take steps like this right now in the face of these trade tensions with China?
MARCO RUBIO: Yeah. Well, first of all, we have to have a cultural realignment about short-term-ism and long-term thinking. And I think that's true for government, and certainly, government has not done its part in basic research and investment and so forth. But I think in the private sector, it's all – since in the 1970s, both our private sector and then public policymakers have gravitated toward giving a presence to the immediate short-term return to shareholders and it's come at the expense of investing in new product lines and new ideas or in creating the capabilities here within the United States. So, we're not a command and control economy like the Chinese are and that's not what I'm advocating. I'm advocating that our public policies treat everything fairly but incentivize things like making immediate expensing permanent so that we accurate a tax incentive to say, 'If you do anything else with your profits, we'll treat you fairly. But if you take those profits or a significant portion of them and use them to reinvest, whether in adding capacity and developing and innovating new ideas, new product lines and so forth, we are going to incentivize that.' It is important that our public policy reflect that priority because the end product of that is the creation of strong and stable jobs, which is the cornerstone of strong communities and ultimately a strong country.
CARL QUINTANILLA: Senator, you mentioned we're not a command and control economy. All of our viewers would agree with you. But, if we're going to write $30 billion checks to farmers and lean on the Fed to cut rates, does that weaken our argument?
MARCO RUBIO: Well, I also think there's a role for government to play in times of emergency or significant national challenge. I think there's a difference between saying 'We're going to abandon the free enterprise system and make central planners at government make decisions,' and having public policies that reflect our priorities. In this particular case, in which specific industries are facing a sort of transition period in which they're being badly hurt there's an appropriate role for government to play in helping them. Now, it can't be our permanent policy forever. You would hope that would serve as a bridge to an adjustment. And it's one of the things we haven't--
JON FORTT: So, for how long, Senator?
MARCO RUBIO: Well, I think obviously it depends--
JON FORTT: How long can we afford to do that? And should we do that?
MARCO RUBIO: Agriculture's a good example of it. Agriculture faces two challenges. The first is obviously now that their products are getting hit, they're losing market access. We never want to lose our agricultural capacity. We never want to lose the ability to feed ourselves, not to mention the world. But I would say the second challenge is farm equipment and heavy machinery in the farm industry. The Chinese have made it very clear they intend to dominate the world in that field and we have to ensure that doesn't happen. Because ultimately, no matter what we grow, we depend on them for the basic equipment necessary to farm and grow, we have a big problem, too. So, I don't know how long it will take. I don't think it takes forever. But what is the alternative? The alternative is to accept the status quo or some symbolic agreement that changes nothing. And the status quo with China is not just untenable, it is dangerous, it is honestly catastrophic, and we will wake up one day not far off in the future and realize that America is no longer the world's most important country or most important economy and that is not something I want to be a part of.
MORGAN BRENNAN: Senator, I want to shift gears a little bit. You're also on the committee of foreign relations. Iran, tensions really ratcheting up there right now. You've got ships being sabotaged, you've got a Saudi pipeline. That's been attacked. We've got an aircraft carrier headed into the region, the U.S. does. We'd have had sorties that have included B-52s being flown yesterday. How great is the risk of an armed conflict with Iran, either intentional or as the Brits have been warning, by accident?
MARCO RUBIO: Well, it's all on them. And it's a grave risk. I don't want a war. We don't want a war. But that's up to them. The fact is the Iranians believe that in order to go into a future negotiation with the U.S., they have to do it from a position of strength. They have developed this model through the IRGC in which they empower these surrogate groups, these proxies to attack people on their behalf, and they think --- this is what they're banking on, they will attack us, we will not be able to respond forcefully because the world is going to condemn us and we're going to have to back down and they'll be in a position of strength. That won't happen. So, if the Iranians do not attack the U.S., there won't be a war. But if they do, they're going to be met with a forceful response, as it should be. Again, I'm not cheering for this. I don't want this to happen. But there's no way the President of the United States can ignore clear movements on the ground coupled with clear intelligence that indicates that Iran is moving towards or has in many cases ordered strikes against U.S. personnel and U.S. interests in the region. That can't happen. We have to respond to that. And I would say think about the alternative. Imagine if an attack like that did occur and Americans were killed and we didn't have assets in the region to respond to protect them. Then the criticism would be, why weren't you prepared for it? We're doing absolutely the right thing and the question of whether or not there's an armed conflict, that's now in the hands of the IRGC, of General Soleimani and ultimately of the Ayatollah and of Iran.
MORGAN BRENNAN: Senator Rubio, thank you for joining us today.
MARCO RUBIO: Yeah, thank you.
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