Wilbur Ross: Giving Companies 90 More Days To "Wean Themselves Off" Huawei

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Commerce Secretary Wilbur Ross told Fox Business Network anchor Maria Bartiromo: "Well, the big news today is that we have decided to add 46 more Huawei subsidiaries to the entity list. When something is added to the entity list, it means that the American companies cannot sell to it, except if they get a specific license."

Ross added that "There is another 90 days for the U.S. telecom companies” to stop working with Huawei and “we’re giving them a little more time to wean themselves off."





MARIA BARTIROMO, FBN ANCHOR: Joining me right now is U.S. Commerce Secretary, Wilbur Ross. Mr. Secretary, it’s always a pleasure to see you.

WILBUR ROSS, U.S. SECRETARY OF COMMERCE: Good to be on, Maria.

BARTIROMO: Thank you so much for joining us. So, can you confirm that you are extending the deadline?

ROSS: Well, the big news today is that we have decided to add 46 more Huawei subsidiaries to the entity list. When something is added to the entity list, it means that the American companies cannot sell to it, except if they get a specific license.

BARTIROMO: So, while you --

ROSS: We have not granted any specific licenses thus far.

BARTIROMO: So, you’re doing 46 new subsidiaries, making it tougher then for Huawei?

ROSS: Yes, well not so much tougher. Just making sure there are no loopholes in the original. We had -- we now have more than 100 subsidiaries on the entity list.

BARTIROMO: Tell me the significance of the entity list? Why this is important.

ROSS: Well here’s the entity list purpose. It’s under the IEEPA legislation. And its purpose is to make sure that we don’t endanger U.S. security. President yesterday in his news conferences made clear his concerns about national security in Huawei. So, adding more entities makes it more difficult for Huawei to get around the sanctions.

BARTIROMO: What about the deadline today?

ROSS: Well, there is another 90 days for the U.S. telecomm companies, some of the rural companies are dependent on Huawei. So, we’re giving them a little more time to wean themselves off. But there are no specific licenses being granted for anything.

BARTIROMO: OK, so the next deadline we should look at then is November 19?

ROSS: Roughly November 19.

BARTIROMO: November 19, and so, do you think that U.S. companies are coming up with a plan to fill that business once that deadline is reached?

ROSS: Well, everybody’s had plenty of notice of it. There’ve been plenty of discussions with the president. And the president has made clear and has announced since yesterday that he’s very concerned about more dealings with Huawei.

BARTIROMO: Secretary, tell me the risk around Huawei. We’ve talked about Huawei being a national security risk because it is a state company, a Chinese communist company. So, can you explain what that means to viewers?

ROSS: Well, technically Huawei says that they are a privately owned company. But under Chinese law, even private companies are required to cooperate with the military and with the Chinese intelligence agencies. And they’re also required not to disclose that they’re doing so. So, it’s a big problem. But the real problem with the Huawei is in connection with the 5G.

Because 5G being software driven, very hard to separate core activities from peripheral ones. In 3G and in 4G, you could make a pretty good argument that you could separate. You really can’t make that argument with 5G. And as 5G becomes the big activity, it becomes of greater and greater concern. And that’s why we’ve been advising our allies to be very cautious in making their decision, and it’s why Congress has passed some legislation constricting American funding of Huawei purchases.

BARTIROMO: The last time I spoke to Secretary Pompeo about this, he said that Europe was not sure. They were pushing back a bit. Do you feel that our friends in Europe understand the national security risk around Huawei? Because they have Huawei telecomm infrastructure throughout Europe.

ROSS: Sure they do, in terms of the 3G and the 4G. But as they say, those are very different systems, and therefore the national security concerns in 3G and 4G are not nearly those in 5G. Also think about it, 5G is going to affect everything. All the way from GPS to any other function you can imagine. And as the internet of things becomes more and more extensive, nothing will operate if somebody interferes with 5G. So, the magnitude of the risk is far greater. With 3G and 4G, you don’t have anything like the interconnectedness of everything to everything else.

BARTIROMO: So China, we know, is a competitor to the United States, wants to be the super power of the world, not only economically, but militarily. What are some of the things that China could do if Huawei is embedded in our infrastructure in the United States?

ROSS: Sure, that’s a very good question. Well, first of all, you never know what might be embedded in these little tiny chips. And you’re talking about very small surfaces and very small things within them can do a lot of damage. And nobody knows the design better than the person who built it. So, you can have consultants look at it and they’ll be very careful but they don’t know it as well as the one who built it, that’s number one.

Number two, there’s constant maintenance. And every time there’s maintenance there’s the potential for something being added or subtracted.

BARTIROMO: Yes.

ROSS: Number three, there are also upgrades, constant upgrades. And as an upgrade comes, you don’t know what’s going to be embedded in it. So, there’s a front end risk and there’s a whole big series of ongoing risks, all of which are extremely difficult to measure. And the only way you’ll really know whether a side door has been put in, is when they decide to open it, and then it’s too late.

BARTIROMO: Yes, and we know that there was a side door or a back door, whatever you want to call it, in Africa. We saw a situation where there was -- and then the African governors noticed it and raised their hand, told Huawei. And then Huawei changed it, so they didn’t know it until they knew it.

ROSS: Well, that’s the problem. You don’t know what you don’t know until it’s too late. And I think that’s the big concern the president has. We can’t afford to take a risk when we get to the internet of things because literally everything will be interconnected. That gives the potential for everything being shut down.

BARTIROMO: I feel like for so many years American companies and CEOs were so interested in getting their products in front of 1.4 billion people in China that they forgot about protecting the product.

ROSS: Well, I think there’s some truth to that. One of the problems with the American public companies is they live in a life dominated by three month periods, quarterly earnings.

BARTIROMO: Yes.

ROSS: And therefore, there’s too much pressure on them to make quarterly earnings, perhaps at the expense of long term results.

BARTIROMO: So, do you think the companies that want to sell to Huawei understand those risks?

ROSS: Well, they do but nobody likes to lose a big customer.

BARTIROMO: Yes. There was speculation that the president was going to speak with President Xi this weekend. Did he have that phone call?

ROSS: The president has made clear he doesn’t want to make public the nature or timing of recent calls with President Xi. They talk a lot, they’ll continue to talk a lot. If he wants to make an announcement about a particular call, he will.

BARTIROMO: And the president said that he’s still talking with China, but he’s not ready to make a deal. What’s the downside risk if we don’t do a deal? I mean look, you, yourself, your colleagues have made a very strong case in terms of the national security risks around China.

ROSS: Right.

BARTIROMO: Now we get it. So, is there a real downside risk if the president doesn’t do a deal with China? How are you going to get them to agree to some of these big ticket items that we know is cultural, like the theft of intellectual property?

ROSS: Well, first of all, there’s very little point making a deal if you aren’t sure it can be enforced. So, it’s one thing to make the terms of a deal, it’s quite another thing and maybe even more important to make sure it’s verifiable and enforceable. Those are key elements. The deal itself, verifiability, and enforceability. We need all three.

BARTIROMO: We keep seeing China break promises. They break promises in the WTO. They break promises to Hong Kong. Look at the two million people in the streets right now.

ROSS: Right.

BARTIROMO: Is that a big topic of conversation around your trade dealings, what’s happening in Hong Kong?

ROSS: Well, the president’s made clear he would like a peaceful resolution of Hong Kong. He hopes there’s a resolution that will suit all of the parties. But it’s very difficult to imagine them using force, the Chinese using force against peaceful demonstrators.

BARTIROMO: Yes, but I mean we had a statement from the EU in Canada about Hong Kong. We didn’t have a statement -- well, the president tweeted about it, so I guess that would suffice. Is that what you’re saying?

ROSS: Well I think a tweet is a very powerful statement.

BARTIROMO: It sure is. Alright, the president spoke yesterday about his meeting with Apple CEO, Tim Cook. And I guess Cook made the point that tariffs are going to hurt U.S. business. Watch this.

DONALD TRUMP, PRESIDENT OF THE U.S.: Tim was talking to me about tariffs, and you know, one of the things, and he made a good case, is that Samsung is their number one competitor. And Samsung is not paying tariffs because they’re based in South Korea. And it’s tough for Apple to pay tariffs if they’re competing with a very good company that’s not.

I said, how good a competitor? He said they are a very good competitor. So, Samsung is not paying tariffs because they’re based in a different location, mostly South Korea. But they’re based in South Korea, and I thought he made a very compelling argument. So, I’m thinking about it.

BARTIROMO: He’s thinking about it.

ROSS: Well, that’s true. It’s a very complex situation.

BARTIROMO: This is nothing new, we knew that anybody who wasn’t in China, South Korea, somewhere else, is going to not pay the tariffs the way China is.

ROSS: Well, that’s true. But not every product is quite as competitive as the competition between Samsung and Apple.

BARTIROMO: OK.

ROSS: And those are really the future. Technology is the future, both for us, for South Korea, for everybody.

BARTIROMO: Once that 10 percent tariff goes into place, do you expect that the economy is going to take a hit?

ROSS: Well, tariffs, for the most part, have not been paid for by the consumers. For one thing you notice against the bread basket of other currencies, the dollar is up something like 11 percent. So, a 10 percent tariff gets pretty well subsume into that.

Second, it’s been seen that a lot of the Chinese vendors absorb all or part of the hit themselves. And there’s probably more government subsidy going into it too. Import prices, in fact, have been down from a year ago. And as you know, there’s very little inflation in the consumer economy. So, thus far there has not been any real basis for saying the tariffs have hurt the consumer.

BARTIROMO: Well you know it’s interesting because with your economic policy having move the needle on economic growth, you’ve seen lots of assets come to America. But there’s a bad side of that too, and that is the strength of the dollar. Top story in the Journal today, a prolonged dollar rally is pressuring U.S. corporate earnings, hitting commodity prices and threatening to deepen the selloff in emerging markets. How worried are you about this strengthening dollar impacting the economy?

ROSS: Well, we’re very upset about the portion of strength of the dollar that’s due to monetary police by the Fed. We think that our interest’s ridiculous -- our interest rates are high relative to many other countries. It was announced last week that the Sun (ph) bank in Europe that’s making mortgages loans with negative interest rates, paying borrowers to borrow money to buy a house.

BARTIROMO: That’s incredible.

ROSS: And yet the U.S. is paying a positive interest rate. What is wrong with this picture?

BARTIROMO: Yes.

ROSS: This is a wrong picture.

BARTIROMO: But --

ROSS: And other countries are continuing to lower their rates. I very much hope that Chairman Powell goes forward and does lower the rate this next time around.

BARTIROMO: But what about -- I mean we don’t have a lot of wiggle room here. We already are at very low levels, and you’ve got negative rates, as you just said, in Europe. How significant is this in terms of indicating a recession on the horizon? Do you worry about these rock bottom rates, even though you want another cut?

ROSS: Look, eventually there’ll be a recession, but this inversion is not as reliable in my view as people think. Anything that takes 22 months to affect the economy and in some cases the inversion has taken that. That’s a long ways and a lot of the variables come in during 22 month period. Beyond which, normally inversions have occurred in the period of tightening money, tightening credit.

BARTIROMO: Yes.

ROSS: And availability of credit is the biggest problem.

BARTIROMO: Yes, we’ve got loosening credit right now, obviously with the Fed lowering rates.

ROSS: Right.

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