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tv   Wall Street Journal CEO Council Discussion with Larry Kudlow  CSPAN  December 5, 2018 11:08am-11:40am EST

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together, which they rarely do, announcing an industry wide five star promise, around the panic button technology by 2020 in all of their -- >> for the -- >> but going beyond that, it talks about doing training and culture and investing in people as part of this five-star, five-point effort. and that is pretty remarkable to reach across competitors to an industry say -- and this is one that, let's be real, that safety in their properties is a pretty important feature of the business. but you can't also be authentically safe for your guests if your employees aren't say and they realize that as an industry and came together. >> tina tchen and lisa banks, fascinating. thank you very much. >> thank you. [ applause ]
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lori, thank you for joining us. >> pleasure. >> so we had some kind of an agreement, dallit is not a deal an understanding but we've had many of these before where china said it will do something and then china doesn't do it. how is this time different? >> well, of course, with finality i don't know that it is different. we don't know that. i'm hopeful and probably a couple of reasons why i'm hopeful, the discussions between the two sides leading up to this and the cables and so forth were really broader and more specific than we've had before with --
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well i'll give you an example, anecdote is perhaps better. on the friday and saturday before the saturday night dinner, steven mnuchin and bob lighthizer and i had a couple of meetings with lehae, their vice premier and he said something that struck me, i hadn't heard before in all of these discussions and he said we can move immediately. and we actually had divided the world of trade issues into three different categories, both sides agreed on that. and at least two of the categories there was more inclination to agree. not the third, but the first two. and so i asked him and i pressed
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him and i said immediately, sir -- and he said, yeah. and i said well, immediately, what does that mean? immediately is a good word. what does that mean? we're at friday so do you mean monday? wednesday? and actually i don't know the answers to that and the car tariff thing might be a little bit of a litmus test but he meant immediately. we're pretty far advanced here in our discussions and we can do those things. so that is the first time i'd ever heard that and my own tenure in this discussion, i'm not a china hand, but i go back to the beijing meeting when i first took this position and then subsequent meetings in washington and so forth. so along with the broad scope of the topics, which are on the table, that suggested to me
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without being definitive or sure, nonetheless, this was a bigger deal than we had -- a bigger conversation than we had -- >> the post meeting press conference though, the chinese said nothing about the 90 days that u.s. has put on this. do you make something of that? it is also tuesday and we haven't seen any immediate -- it is now tuesday. we haven't seen any immediately -- yet and they haven't acknowledged the 90-day time zone that the u.s. is expecting within which that there could be substantial movement. >> we'll see. i don't -- china has its own communications and they have this own domestic audience and so forth. so i can't speak to that. i wouldn't read a lot into that myself. look, one of the things that was, again, interesting to me and i think important, president trump had been saying for quite sometime that he had a good
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relationship with president xi. i'd never seen xi up close and personal. so at this dinner, i saw real chemistry between the two. and i will add two things where president xi agreed quickly, so president trump asked for a redefinition of fentanyl, as a controlled substance, very big issue for the white house and the president, killing hundreds of thousands of people, and china unfortunately does a lot of processing of that and selling it. so president trump asked them to redefine it which has important ramifications for chinese law and punishment and president xi without hesitation said yes. and secondly, later in the conversation president trump
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asked president xi, would he reconsider the qualcomm deal if it came up again. and again, almost without pausing, president xi said, yes, i will. >> but you're asking them to do -- >> now let me make a point here, john, for this. for many months -- for many months i have said -- well, when i was a reagan cub scout and omb years and years ago and mrs. reagan coined the phrase just say no to drugs and so people asked me recently what should china do and i would say, tongue and cheek, but some seriousness, china oughta say yes to something. because they never have, in the eight or nine months that i've been involved in this negotiation.
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now they're not saying -- i can't sit here and say they're going to say yes to all of these things, it just struck me that president xi said yes to a couple of important things and that is the first time i've heard any senior official, much less the president, say yes. that is why i'm raising this anecdote. >> right. we know they could be -- that leaders in china could be charming and gracious in meetings but you're asking them to do in 90 days what has not been accomplished over the last two decades of asking. and the chinese have played rope-a-dope. and they delay in hope that the administration will come and go and then continue to subsidize on enterprise and do demand to get into the chinese market and to hack companies for information that they then use to build out their own industries to create unfair standards in the country -- >> i.t. theft and high tariffs.
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>> and you are expecting them to move in 90 days that -- it is hard to imagine that -- that despite the relationship between mr. xi and mr. trump, that they will necessarily move this time. >> i have no assurances. i agree. i'm just saying that in my judgment and others may disagree, we've come further and that the table of contents is larger than anything we've seen before, that does not assure -- >> things that they are agreeing on? >> yes. and things that they're willing to real talk about than anything we've done before. i'm very happy that we have bob lighthizer who will be the negotiator but he is the guy
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that will monitor this thing. timetables, agreements, trust verified to use an old reagan phrase. he's the best in the business at that and we'll be extremely tough on that. and it may not get done, okay. it may not get done. i'm just saying that it looks to me like the ball is being moved in the right direction much more than the past eight or nine months. but i can't sit up here and say we're going to get this, this and this. >> so what should the ceo's in the room use as the measuring stick for success? what should we be looking for by march 1 to determine whether or not we're beginning to progress sufficiently toward the goals to say we're going to continue progressing toward those goals. or that there is not enough progress made and march 1, the end of the 90 days, are you prepared to raise tariffs to 25%? >> well the president certainly is. he said that. i abide by that. >> so what should we look for --
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>> specifics. see what the list of specifics looks like. one easy one to me is they should eliminate the car tariff. nothing easier. and president trump believes they will. he's been tweeting on that. >> eliminate it entirely. they raised it in retribution to the u.s. tariff and it is up to 40% only for that reason. they could bring it down to 25% and we'd be back to where we were. >> well it was 15% and then it -- and then in retaliation they moved it to 40%. just get rid of it. just get rid of it. i would use that as a litmus test myself. it is so easy. so that is one area. i would have a clear look at whether they're lowinger tari - lowering tariff on industrial commodities and i would keep track of that and not measure it against specifics. these are not government to government transactions.
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these are private sector transactions and they have issues in macro economics and supply and demand. but they have said a lot about that in our meetings privately. >> so i would monitor that. and regarding the other points you make. to me the most important issues for the long run health of the united states are the technology-related issues. the list you gave is correct. i've said this many times. my own disappointment with china not moving on this and never saying anything about it. we can't let that happen. we cannot let that happen. these are our crown jewels, what give gives america inventions and entrepreneurial, they cannot steal it and issues of ownership of american companies, which is really at the heart of this because the chinese insist that they own the majority of the joint ventures, they can order our companies to
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literally put their blue print on the table and that's a sure formula for stealing technology, right there, that is your forced transfer. that needs to change and we need to see some changes there. so without reviewing every issue, i could give you page after page of issues, some high points, let's take a look at and see if they've made any progress. >> these are worthy objectives and big problems the businesses had and at the same time we're not asking china not to change international business but to change their economy. this is the community party, using state own enterprise for patronage to control the economy and to control their own -- sustain their own power in china. so we're -- >> it is a state-run economic. >> we're asking them to -- >> it is doomed to failure. >> but you also wonder why they would want to change that to keep them --
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so given this uncertainty it may be doomed to failure, but should ceo's look at this and say we're not sure what will happen. maybe the trump administration will advance this and maybe xi was being genuine or maybe not. should we be rethinking our supply chains? should we be diversifying away from china, pulling things out, sending to vietnam, to india and other places in the world, would you encourage them to do that? >> i don't want to get involved in business models and so forth, which is what you're asking. i think american ceo's should be very realistic and i think over the past 20 years where my reading of the history suggests that china has stopped the free market advances of the dong shi ping era which were terrific. i don't think much has happened. in fact there is evidence they are moving into the wrong way.
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>> to refrenchment. >> yes. and i'm not here with the bill attainer. we just had a good dinner with president xi but you have to be realistic. i don't think a lot of people in american business have been realistically sufficient but now i see changing attitudes and i think that is correct and think that's right. i'm not going to encourage them to leave or stay or any of that stuff but you just have to keep your eyes wide open and i think these trade talks will be significant. >> don i don't think the trade talks are designed to completely change your system. i don't think so. i think these talks are centered on a variety of specific issues and much as i might want to have them adopt a kudlow-ian supply
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side model, breaking news i prefer lower tax rates, no regulations and limited government or limited regulation, i'm not sure we get there in 90 days with china. but i think on specific matters we can or we can move the ball in the right direction. look, if not, as again the president has been very clear on this, we'll go back to 25% on the existing tariff goods and services and may add to that. so i defend that. i think that's right. so we'll see. we'll see. >> so the -- >> don't be -- look, i understand having been a journalist for a long, long time, i understand your side of the street. i get that. you could be too cynical. you could be. i'm going to leave that up to you. >> we'll see in 90 days. >> all of my smart friends at
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the "wall street journal," you could be too cynical. just saying. >> well that is entirely possible. the chinese has v been mastered of industrial policy. >> yes. >> they are talking about 2025 mastering economic and business sectors, where is our 2025 plan? where is our -- not industrial policy -- >> yes, it is. >> but our objectives. >> i don't want 2025, i don't want central planning. i don't want any of that stuff. >> basic science investment? >> sure. if you get into something like that, sure. where it makes sense, yes. >> governments always had a finger in that. >> sometimes it works and sometimes it doesn't, as you know. president trump is not a central planner. he's a capitalist. heaven forbid, so am i and so are the people around him.
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that is what the tax cuts and the deregulation and the energy programs are all about. that, by the way, is what the trade talks are all about. i think he is a trade reformer and he means it when he says he would like to have zero tariff and zero nontariff barriers and subsidies. it is a tough road but he means that. so we're not planners. we're not planners. and i don't think that model will work. i believe history is on our side. now, i worked in the reagan administration, i learned from him. he was sitting around talking about overthrowing soviet communism when most people were trying to figure out how to contain it and do business with it. i learned from that. some of those lessons are applicable here with china.
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it's different -- anyway, i don't want 2025. i want 2019. we hope to get there and we'll have policies and, by the way, if you allow me, i think our economic policies have done very well. the economy is growing faster than almost any of our critics suggested. yesterday we got this booming ism manufacturing number. people were -- i'm amazed at this sort of mini wave of recessionary pessimism that is swept the media, i'm sure you're not guilty of that, but the evidence is quite different than these speculations. we're humming. >> let's talk about the economy for a second before we go to questions. >> we're humming. i was hoping you would. >> the economy is doing well. you don't see a recession on the horizon. >> i do not. >> for the next couple of years? >> at least. >> can we get the graphic of the deficit. what are do we make of this, larry? is this a bad thing happening?
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>> excuse me, my back -- hold on. >> your projections have gotten worse. for people in the audience, the distance between the zierleero line and the tip is the bad stuff, right? that is the percentage of gdp that the deficit is causing. so between 2017, the white house projection, which included some spending cuts, right, and 2018, that projection has gone up and the cbo, the congressional budget office is much more negative than the white house is on the size of the deficit going out the next several years. what should we -- what does this mean? >> by the way, my views on the cbo are well-known. >> they are. >> but i would just say, it is interesting to me that the level of the deficit in 2018 was about a hundred something billion lower than cbo estimated and i
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think i'll ask mick mulvaney that it was -- >> let's ignore the cbo for the point of discussion. >> but we don't agree with cbo. we argue their economic growth estimates are way too low and hence the deficit share of gdp will gradually fall over the next few years. look, i would argue that the success of the tax cuts already have paid for at least two-thirds -- the growth has paid for at least two-thirds, maybe more. cbo's own estimates before and after the tax cuts, they're nominal gdp was raised by $6 trillion and that is where i get the number that suggests two-thirds of the deficit -- that is their own models that i don't agree with because they're too pessimistic and they don't as a rule like tax cuts or
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supply side incentives and lower marginal tax rates. so be it. we'll have that debate for the next hundred years. >> should we worry that the white house objections have become negative. >> no, we have a little group and we're all trying to be as realistic as we can. certainly for the upcoming fiscal year. but in the out years, as your charts show, the deficit share of gdp comes down quite a bit. and i've always been associated with reagan's rosie scenario which i might add basically came true. it took a while. but, yeah, it worked. this one will work, too. we're on target for our growth. and so that is the building block for this thing. now the president has already announced publicly that we are going to be very tough on spending, probably tougher than last year, as you know, he wants
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across the board 5% reduction in domestic spending, nondefense spending. that's pretty tough. and we will attempt that. i know the ritual is budgets are dead on arrival but we'll see. but we're going to fight that battle. he's got an omb budget hawk now coming on board to help director mulvaney tw mulvaney who is a very dear friend and mnuchin and kevin hatchet, we are all budget hawks. i don't lose sleep over deafifis but i want limited government and i want growth and i think we're on pace to do that. >> let's get questions for the audience for larry kudlow. any questions -- right here in the front, please.
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>> i'll ask the same question i asked ambassador bolton, so there is a list of 142 or so items that have been presented to the chinese and if they agree on behaving perfectly on wto and they agree to stop cyber theft, if they agree to ip protection, you mentioned dropping tariffs on autos, what else on the 142 list is really important, high priority for the u.s. side? >> by the way, i assume john mentioned this aspect, but whatever happens or doesn't happen, our monitoring and enforcement will be very, very strong. again, my former boss reaganed
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is trust but verify and the chinese are not good on that and we have a history. so whatever comes, i want to make that point. and i also -- the various aspects of the technology problems i'll call them are so important. we are talking about commodities, we're talking -- and i ask le eu hey and since it is not government -- and which is consistent with the prior views, tariff rates have to come down in order to achieve increased purchases. and he agreed. and i was delighted to hear that. that is a good thing. and we're working on nontariff barriers too but that is really important. so a quick plug on that, if you open -- if they open their markets to us in the industrial
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and agricultural area and the energy area, all of which came up and president xi talked specifically about energy, i believe we will just have an astronomical increase in our expert sales to china for the simple reason that our economy is the most competitive in the world right now. it is the hottest, and the most competitive and if you give us a chance, we will sell and sell and sell which will benefit our economy and our farmers and our manufacturers but we'll also, in my view, benefit chinese people. they'll get the best there is. so that is a very important -- but i come back to the -- the technology related issues are the most important issues. >> let's get one more question. i saw in the back, one quick question before we go to break. right there. >> larry, rich headelman, your old tennis partner. >> yes. >> what about the fact that the
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chinese have basically a circle around baidu, hauwei and then connected to southeast asia when we can't play in that. i haven't heard about what we could do with google and facebook and others to get into the market or maybe that is unrealistic altogether. >> yeah, um, as you know, we -- i call it siphious plus, i guess firma is the acronym for it and the technology issues, what i call the family jewels, so we've put in tougher rules and we are not ending investment but it was an important piece of legislation, very important to protect us. now i think we do telecom stuff,
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if you will, better than they do it. which is -- i don't want to make a federal case out of this right now, but that is kind of where the theft comes from, does it not? if they could do it on their own, i presume they'd do it on their own and since they can't seem to do it on their own. >> they're not above stealing it. and i don't know that we'll end that but i could tell you that is -- that whole process, which includes cybersecurity issues, as you know. it maybe comes down -- the more i think about it, i'm not a china hand, i've lived this for eight or nine months and the more i think about this and participate in this, it strikes
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me that the ownership issue is really important, okay. they need to change their so-called joint venture system. they just do. that is nearly the root of all evil. and i don't even know why we have to have joint ventures. if they want american companies to come in, and a lot have, and not all american companies have done joint ventures but many have had to and do, that gives the chinese the authority to get a pretty good look at our technology in whatever field it happens to be. that has got to change. i, myself, just will continue to emphasize that. bob lighthizer talks about this all of the time and mnuchin. that is essential. and i'm glad to see that a lot of american businessmen and
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women are talking about this now, the center -- i was telling jerry about this before, the center of that conversation is now moving in our direction. people are picking up on it. i saw my friend hank paulson give a speech on that subject and sound just like me. the interview of mr. paulson. that is good. because that is where we really -- i mean, i'm not -- i would love to -- i'll sell as much energy and l&g and soy beans as they want but the other issues, the ownership and the technology issues, the cyber, that has to be addressed. it is so important to the future of the united states and to our relationship and to any potential trade deal. i'm just saying, you'll hear other people from the administration, i presume they'll agree with me but i'll tell you that this camper really wants palpable, clear,
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measurable reforms in that area and not teeny weenie reforms. big reforms. that is the heart of it. now i'm not going to be able to change china's central planning system. okay. you understand that. again, i wouldn't mind breaking news, kudlow is a free trader, but this other stuff has got to stop. it just has to stop. we've put up with it too long and now i think the center of the discussion is now finally moving. and, look, i'm going to give a kudo to president trump. i have no idea what your views on mr. trump and i'm not here to give political advice, i'm just going to say this. president trump inherited this, including a wto, which has to be -- i just -- the plenary sessions at g-20, virtually every country agrees that the wto has to be completely reformed. it is broken. so that is one issue. and every country agrees with
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us, they are experiencing it, whether it is germany or france or canada or whom ever, japan, they are experiencing the theft and the whole issue of ownership problems. this has to change. and we do have a trade coalition of the willing. everyone is in agreement. and we signed a tri-lateral document, so important that the u.n. and in the autumn and the fall, which was the e.u., the united states and japan, which explicitly discussed, quote, unquote, nonmarket problems, re china, et cetera. and third this is -- in my view this is the crux of this conversation with china and i don't want to be overly pessimistic and cynical as you are. oh, sorry, didn't mean to say
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that. but i want to say in degrees of importance, that has to be changed. >> well leave it on that optimistic note. >> appreciate it. >> larry kudlow, thank you very much. [ applause ] >> thanks a lot. thanks for coming. so we'll take a break now, coffee and refreshments right outside. we'll be back here in 30 >> thank you so much for joining us today. you came here straight from buenos aries, argentina, at group of 20 summit and you presented the wto annual trade monitoring report to world leaders. this year the conclusions were rather grim. can you summarize for us what you saw in the report. >> the report shows that there was a very large increase, a dramatic increase on the amount of trade that has been covered by restrictive measures around the world. i would say a lot of that is attributed to the increased


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