WHEN: Today, Wednesday, September 11, 2019
WHERE: CNBC's "Squawk Box"
The following is the unofficial transcript of a CNBC interview with Senator Marco Rubio (R-Fla.) on CNBC's "Squawk Box" (M-F 6AM – 9AM) today, Wednesday, September 11th. The following is a link to video from the interview on CNBC.com: https://www.cnbc.com/video/2019/09/11/sen-rubio-federal-worker-retirement-funds-must-not-be-invested-in-china.html.
All references must be sourced to CNBC.
JOE KERNEN: China was out today with a list of U.S. products it plans to exempt from tariffs, including items like animal feed ingredients and lubricants and some cancer drugs. The question now on whether this could provide an opening for goodwill or progress as negotiators get ready for new trade talks. Joining us now for his take on where things stand, as well as the tensions in Hong Kong and more, Senator Marco Rubio of Florida. Great to have you.
SEN MARCO RUBIO: Thank you.
JOE KERNEN: Been a while, Senator. Good to see you.
SEN MARCO RUBIO: Good to see you.
JOE KERNEN: The thing I think we need -- we'll start talking about something that you have an interest in. And that is that you need, I guess, to look closely at investments from time to time to see exactly where things are headed. And the MSC Index, MSCI Index, contains a lot of companies – Shanghai companies. And if our retirees -- government retirees are investing in that, it seems counterproductive to everything we're trying to accomplish here.
SEN MARCO RUBIO: Well, yeah, there's two aspects to that. The first is, what you've outlined, a lot of these are government-backed or government-controlled companies. In fact, there is really no such thing as private companies in china compared to what we have in the West and certainly in the United States. They're all, to some extent, instruments of state power. So, the first question is whether U.S. investment dollars should be propping up these companies that are actively seeking to undermine U.S. economic and national interests. But the second point is the transparency part of it. You know, when you sell securities on U.S. markets and exchanges, there are transparency requirements. You have to be able to go see the audits. Why? Because you want shareholders to be protected. There are disclosure requirements. Things that you want people to know, the risks they're running, the decisions they're making and how they're being managed. We don't have that insight when it comes to these Chinese-controlled companies. The Chinese require all of these records to be kept on the mainland. And they block, they block our ability – our regulators' ability to go in and see what's going on truly behind the scenes. And so, you have American investors, including federal employees through the retirement program, the TSP program, investing their hard-earned dollars for their future retirement into companies which we have no oversight, in comparison of virtually every company being sold -- selling securities on our exchanges and in our markets.
JOE KERNEN: Seems like you could get some bipartisan support for this, right, to stop it?
SEN MARCO RUBIO: Yeah.
JOE KERNEN: Is that in the works?
SEN MARCO RUBIO: And it is. Our bill is bipartisan. And it's a new issue. A lot of people aren't aware of this. Frankly, I learned about this a year and a half ago. And it's an extraordinary risk moving forward. You can imagine what a – how much leverage that is to U.S. -- against the United States and against China. But there's just, irrespective of everything else, I think the question -- the fundamental question on this and on various topics when it regards China is how come their companies, their firms and in this case those companies that are publicly traded, why don't they have to meet the same standards as American companies have to meet or other companies have to meet? In this case in terms of transparency and the ability of regulators to go in and see what's going on and provide that information to shareholders and those who are trading, including at the retail level.
RICHARD FISHER: Can I ask a question, Senator? Last week General Mattis made an interesting comment which was you can't expect an authoritarian control freak, he didn't use that term, but communist intrusive government at home, China, to be a force for liberalization and capitalism abroad. Isn't -- and you can't square that circle.
SEN MARCO RUBIO: Yeah.
RICHARD FISHER: I assume you agree with that. I mean, this is the -- this is the disconnect that we have in trying to deal with China in financial terms.
SEN MARCO RUBIO: Yeah. Well, that's exactly right. I mean, frankly, their political culture is not one that -- they just – they don't view things the same way that we do. These are not government leaders that somehow understand our system and decide to go in a different direction. They have a very fundamental different view of everything from human rights to what real democracy means. Now, here's what happens with China. Okay? They are and are going to continue to develop into a great power. This is not about containment. This is not about stopping the rise. This is about, however, having a proper balance in our relationship with them which is growing increasingly unbalanced, frankly, because we have made the mistake as policy makers in this city for a long time of ascribing to the Chinese government and the Chinese system attributes of our own system. We see a Chinese company and we say, 'Well, they're a corporation like one of ours.' No, they're not. American corporations don't have dedicated seats on the board and don't have employees representing the governing party of the country. They do in China. And to prove that, how they're used as an instrument of power, you look at the business and investment deals they make all around the world. Most of them make no economic sense in terms of profit and loss. They are subsidized by the government because they are used for policy. It's how they're getting their foothold on telecommunications, it's how they're getting their foothold on various different industries.
JOE KERNEN: Senator, over the years you've been a big proponent of exporting a lot of our values. Human rights values especially of the United States. And can we talk about Hong Kong? Do you think that President Trump should have been tougher on President Xi or tougher on -- more in support of the protestors in Hong Kong? What do you think we should be doing there?
SEN MARCO RUBIO: Yeah.
JOE KERNEN: And do you think it is a fine line that we need to -- you know, to be careful not, you know, to make things worse where something, you know, really horrific could happen? I don't know, where are you on that?
SEN MARCO RUBIO: Clearly, someone at the President's level and so forth, I mean, they have to deal with China holistically, the whole of the relationship, and that includes trade and so forth. I believe, however, that the defense of democracy and human rights is in our national interests. One thing is promoting it. Another thing is defending it. And that's what we're talking about in the case of Hong Kong. But, there's a bigger point to make. And that is China made a series of international assurances about autonomy in Hong Kong when the handover occurred. And they are violating those. The extradition bill was the latest in an ongoing effort to slowly by but surely erode all of the assurances to the international community. And so, number one, they can't have it both ways. They can't enjoy the benefits of Hong Kong's special status that we accord, for example, in economic and commerce and trade with Hong Kong versus the mainland. They can't enjoy the benefits of it and yet, also enjoy the benefits of violating that autonomy. But the second thing that's insightful, and that is comments made by some Chinese authorities, is that the agreements are nothing but a piece of paper now. We need to keep that in mind on any agreements that we reach with China: on trade, on security, on you name it. Because they have shown that they have -- they don't believe that they have any sort of long-term duty to keep their commitments. So, it's relevant on two points. And what we can do, I think my Hong Kong bill is bipartisan. There's a house version, as well. What it would do is require a systemic annual review by the state department to certify that, in fact, Hong Kong remains autonomous, given the conditions in that given year, and, therefore, still eligible and worthy of the special treatment that it receives.
JOE KERNEN: But you don't want to set the hurdle rate, I don't think, too high to get some type of agreement. You've mentioned using Huawei as a bargaining chip isn't a good idea. Like, if we were to get more AG buys, you can't, you know, all of a sudden ease up on Huawei. But if you said all human rights violations as precedence of arriving at a trade deal, we're never going to get here.
SEN MARCO RUBIO: Yeah, and then again, there's a role for pragmatism. But that doesn't mean we can't speak out and do what we can to defend human rights because the Chinese are doing everything they can to erode the principles all over the world. There has to be a counter balance.
JOE KERNEN: Senator, thank you. I appreciate it.
SEN MARCO RUBIO: Thank you.
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