Executive Session
Floor Speech
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Mr. RUBIO. Madam President, there has been a lot of coverage over the last couple of months and years really--but certainly in the last few days--about the topic of China, ZTE, and trade. I have had a lot of questions about it, both in the hallways from the press and constituents back home and even from family and friends who have inquired what all the ruckus is about. I thought this was a good opportunity to lay out for my constituents and broadly for the American people what is at stake.
The first thing I would encourage everyone to do is to separate the two issues, the issue of trade with China and the issue of a specific company called ZTE, which is a phone company--a telecommunications company in the cell industry based in China. They were the fourth largest cell phone company in America, up until very recently when they struggled to stay in business. We will talk about that in a moment, but let's talk about those two things separately. They are not necessarily interrelated.
On the broader topic of trade and China, the United States has an enormous imbalance in trade--as we do with other countries but none like we do in China. A trade imbalance, by the way, in and of itself, is not problematic. It really depends on what has caused it, but the trade imbalance with China is problematic because of how it has happened.
China was basically poor, underdeveloped, under a Communist dictatorship, and decided it wanted to open up to the world and become more economically prosperous many years ago.
The deal the world made with China is, we are going to help you develop economically. You are going to open up. We are going to help you invest. We are going to help you create opportunity. We are going to let your companies invest in our economies.
There are rules in the world for trade. There are things that are allowed and things that are not allowed. For example, you are not allowed to steal another company's secrets. If another company has figured out how to make something, that is proprietary. They own it, they developed it, they spent money creating it, and you are not allowed to go there and steal that from them and start making it yourself.
You can't have rules that say your companies cannot sell in my country, but our country can do whatever we want in your country. There are rules. China has never played by those rules, and everybody knew it. Nobody disputed it. Administrations from both parties, the consensus politically in America was go ahead. Let's let China cheat. Let them keep stealing things because once China becomes richer and more prosperous, they will stop doing that stuff. As soon as China's economy grows big enough, not only will they stop doing all that, but they will become a democracy.
Everyone who said that was wrong. That is not what has happened. They are less Democratic, less open today than they used to be, and they are no longer just stealing little secrets to be in the same ballpark. They are stealing $600 billion a year of intellectual property. Six hundred billion dollars a year is equivalent to what we spend on the U.S. military. They are stealing the equivalent of that every single year.
How do they do it? First of all, just straight-out espionage. Time and again, they hack computers, they hack emails. They have spies embedded inside companies. They straight-out steal it through espionage.
The second thing they do to protect their industries and grow at our expense is, they don't allow many of our companies to do business in China--huge market. Their companies get to do business here, but they don't allow our companies to do business there--some companies.
They do allow other companies to do business in China, but here is the deal. If you do business in China, it has to be a joint venture with a Chinese company--51 percent Chinese, 49 percent American company. On top of that, there is another catch. If you want to do business in China with a Chinese company, you have to transfer your technology to them. If you want to build turbines, we will let you build turbines in China, but you have to transfer to us the technology of how you do it.
Do you know why they do that? Because once they figure out how to do it themselves, they don't need their American partner anymore. They kick you out, and now they are your competitor and may even put you out of business. That has happened many times. If they don't achieve it by forcing you to transfer, then they straight-out steal it from you.
They also buy up small companies. We have a law here that is called CFIUS process. When a foreign company, especially from a country like China, is buying in a key industry, it undergoes this review to make sure it is not a deal where they could be taking secrets that are tied to national security.
They figured it out. They are just buying small American companies, a bunch of them, in many cases, that are under the level that we look at, these subcontractors, and finding their way in that way.
Suffice it to say that we have a very serious imbalance with China, but the imbalance is not the dollars. The imbalance is in the structure of trade between China and the United States. That is why we don't need a short-term trade deal. This is not about saying: All right. Go ahead and buy more of our agriculture. You guys go buy more of the stuff you were going to buy more of anyway because you need to. In exchange, you get to keep doing what you are doing now, and there will not be any tariffs.
That is a short-term deal. It might be a good headline. You can claim that you won, but in the end, it doesn't do anything to change it. In fact, it leaves us worse off. You might as well have not even gotten into this in the first place. You have actually strengthened them even more.
Let me tell you how they win this fight. They go to all those American multinational corporations, many of whom are just interested in how their stock is performing from quarter to quarter, and say to them: Lobby your Congressman, lobby your Senator, lobby the White House, and convince them to drop all of this.
They do it because what these companies want is to have access to the 1.3 billion people. They don't care if they are only 49 percent of the company in China. They don't care if they are stealing their intellectual property. By the time that matters, the CEO and the people making that decision will be long ago retired, with a huge golden parachute bonus because they delivered a bunch of quarters of earnings. That is so shortsighted.
They may not care about it, but those of us who work here have to because we do not want to live in a world where China dominates industry, not because they outinnovated us or worked harder, but because they stole it from us.
By the way, the Chinese have figured all of this out. They have figured out exactly how to get things done in American politics. They don't lobby the government. They lobby the business sector. Then, all these large corporations go marching onto Capitol Hill and into the White House and scream and plead to drop all this. Of course they do because they are going to make a lot of money in China over the next 5 or 6 years.
A lot of these companies are one day going to be out of business. It is short-term thinking. Their obligations are to their shareholders. Their shareholders are not all Americans. Our obligations are to the American people and America's future.
This is disastrous. We need a structural rebalance, not just a dollar rebalance. China is not a developing country. It is the second largest economy in the world. It will soon be the largest economy in the world. Yet we continue to let them cheat and steal. That is the trade issue.
ZTE is something completely different--related but completely different. Let me tell you about ZTE. ZTE broke the law. ZTE sold goods and services to Iran and to North Korea. They violated sanctions. They tried to cover it up, and they got caught. When they got caught, they got hit with a fine and were told they need to fire the people who tried to cover it up and the people who did this. They paid the fine, but they did not fire the people who did this. Do you know what they did instead? They gave them bonuses, and they tried to cover that up.
The Commerce Department said: Fine. We caught you. We made a deal with you. You broke that deal. Now the penalty is, you cannot buy American semiconductors. That was the penalty. We are not going to sell you any more semiconductors for 7 years. ZTE says it is going to put them out of business because they do depend on us for semiconductors.
Now we are reading there is a new deal in place, potentially. The new deal is not official, but I have read it, and it has been reported. The new deal is this. We are going to let you stay in business. Pay a fine, $1 billion or this morning I heard $1.3 billion, and $1.3 billion is nothing for a company backed by the Government of China. The Chinese Government will pay it for them. Are you kidding me? Only $1.3 billion to continue to stay in business and one day replace America in telecommunications? That is nothing.
The other sanction--guess what it is. We are going to force you to buy more things from America.
That is not a punishment. That is a reward. That is exactly what they want. That was the sanction. The sanction was they couldn't buy more from us because they can't stay in business unless they buy from us. The punishment is going to be, instead of punishing you by denying you semiconductors, we are going to really punish you by forcing you to buy more semiconductors from America.
They were going to do that anyway. That is a reward, not a punishment. That is a terrible deal. Some people say that is a deal that is tied into the broader trade deal, another terrible deal.
If I were China, I would give us anything we want on ZTE in exchange for being able to continue to undermine the American economy, but it goes deeper than that. Here is the other problem with ZTE. If it is just one company, it is one thing. China intends to dominate the world in the key technologies of the 21st century--aerospace, biotech, quantum computing, artificial intelligence, 5G, and telecommunications. They are going to dominate the world.
Do you know why I know that? It isn't because I read some fancy article. It isn't because I am on the Intel Committee. It isn't because of a hearing. It isn't because of a meeting. Do you know how I know that? Because China says it. They have a plan called China 2025, Made in China 2025.
Here is what the plan basically means. By the year 2025, China will be the dominant country in the world in these 10 to 12 industries, which happen to be the 10 to 12 industries that are going to determine the fate of the 21st century. Biotech basically means genetic medicine, the ability to cure diseases like Alzheimer's disease and others that are going to be a plague on the world in the years to come. Aerospace means technology for space. It also means aircraft and the like. They don't intend to be competitive in those fields. They intend to dominate those fields.
You may say: Well, what is wrong with that? Countries can want to dominate fields. It is fine.
If you are going to become the dominant power in the world in these key technologies, you have every right to do so but not by breaking the rules. That is how they are doing it.
What is China doing in order to dominate the world in 2025? To their credit, they invest a lot of money in research and development. They also invest a lot of money in stealing whatever we have already done. Think about it. America invests taxpayer money. We innovate something. We innovate it. After we spend all of your money innovating these things, they take it from us and steal it. It costs them nothing to start out exactly where we are after years and years of work.
Think about that for a moment. That is an enormous competitive advantage. They have free research funding by the American taxpayer. They steal it.
What else do they do? They do other things. How do they steal it, you may ask. One of the ways they steal it is through telecommunications. They are trying to embed themselves in our telecommunications system. Here is how. They know, for example, the U.S. Government or a defense contractor are not going to buy a ZTE phone, but they have a solution for that. The solution is, they sell the ZTE phone, the exact same phone with the exact same components inside of it--the things they can turn on and off to listen to us or take emails or documents or whatever they need, and they sell the exact same phone to an American telecommunications provider. The American telecommunications provider puts their sticker on it so you think you are buying not a ZTE phone but a phone that belongs to an American company, and they sell it--it is called white labeling--or a router. Huawei has a router. The Department of Defense or the government is not going to put a Huawei router in a sensitive place. That is fine. They will sell it to an American company. That company will take off Huawei and put on their sticker, and you have a router controlled by a Chinese company that is beholden to Chinese intelligence. Even if they wanted to not cooperate, they don't have a choice.
When they tell them, we want you to go into that router and get the secrets of this company or the secrets of the U.S. Government, not only do they have to do it, they will do it, especially if it is in telecommunications. That is happening right now. They embed themselves in our telecommunications system that way through white labeling.
The other thing they do is they use their American subcontracting unit. Again, they know no one is going to hire them to build a military base and put the wire in it. You hire an American company. That is the prime contractor. They come in as a subcontractor to the prime contractor, and they are the ones doing the work. We think we hired an American company, but the work is being done by a subcontractor controlled by ZTE or Huawei or any of these other companies. That is another way they do it.
I am telling you, we are going to wake up one day and realize that in our own country, embedded in our telecommunications system--in our cable, in our routers, in our internet--are a bunch of component pieces that not only leave vulnerable our Department of Defense but our business community. To what? To stealing corporate secrets and commercial secrets that allow them to take the research America has done and use it as their starting point free of cost. This is not fantastic. This is why people are so fired up about ZTE. This is not a game.
Somebody just sent me an article a few minutes ago. I don't know which one of the publications it was. It was talking about me and taking on the President on ZTE. This is not a political game. It has nothing to do with that. This is not about politics. Do we not understand where we are headed? You have a country that is actively saying we are going to displace you. We are going to be the most powerful country in the world, and we are going to do that at your expense. We are here talking about all kinds of other crazy things or political reporters cover this through a political lens. This is not a game.
Do you know why China wins these negotiations? Because they don't play these games. They know what this is about. They have a 10-year plan, a 20-year plan, a 50-year plan. We can't even think 48 hours ahead. Everything here is about a political issue. It is not a game. Whether you want to believe it or not, every single one of us was elected. We participated in politics. I think most of us, if not all of us, do not want to live in a world in 10, 15, 20 years on our watch, where some other country now dominates the world at our expense, where we now work for them, we now are beholden to them for everything from medicines to technologies, and we were here when it happened and didn't do anything about it because we were loyal to our party or because we were too busy focused on--well, just turn on the news when we have a massive threat before us.
By the way, this is the stuff historians write about. A hundred years from now, we will all look like fools because, if you are just watching this on an hour-by-hour basis, it is not a big story. Yet, 100 years from now, when someone writes the history of the 21st century and we have let this happen, they are going to write about us. They are going to say that we were fiddling while Rome was burning, that we were allowing the Chinese to take over the world at our expense and displace us because we were too busy doing all kinds of other things.
By the way, this is not just about business. When you turn on some of the networks that cover the stock market, they cover this like a casino. Oh, the trade thing is doing better today, so the stocks are up or the stocks are down. Forget about that for a moment. You can make all of the profits you want over the next 3 to 6 months. I promise you, if this continues, in 10 or 15 years, you will not be watching the U.S. stock market; you will be watching the Chinese market, and it will be determining whether our companies survive. It will be we on the outside, looking in.
Then Americans are going to wonder: Why do we no longer invent great things? Why do we now have to do whatever China wants in the world in order to get the medicines we need to cure my mom or my dad's Alzheimer's?
The answer will be, when they were displacing us, your policymakers were too busy arguing with each other and playing dumb, ridiculous games on a regular basis. Meanwhile, China was focused like a laser on a plan, and it executed it.
This is not a game. I can think of no more significant issue from the perspective of history than what is happening now. Do not misunderstand me. I do not come here to say that I want to be unnecessarily aggressive with China or that I want there to be a confrontation. China is going to be a rich and a powerful country, and we have no problem with that--we can't have any problem with that--but there has to be a balance. It cannot be a China that is rich and powerful and an America that is weak and not prosperous.
Those imbalances are what create wars. Those imbalances are what create misery. Those imbalances are what destabilize the planet. That can't be. We need to recalibrate this relationship. It needs to be rebalanced on the trade side. It needs to be protective on our national security side. It needs to be equalized. If it is, China can still be very successful. It is going to invent things. It is going to create jobs. It is going to become more prosperous. That is fine. We have been doing that for 100 years.
Every person who is sitting in the Gallery, every person here in the well of the Senate and on the Senate floor--everyone you know--has a product on him--a phone, a belt--that has been made in another country. The issue is not that other countries make things and that we don't. The issue is not about our dominating everything. It is about balance, and this is not balanced. This is headed for a dramatic imbalance. The imbalance used to be that they made cheap things and sent them back to us so we had lower prices. That is what has happened for the last 30 years. They have made cheaper T-shirts; they have assembled the phones more cheaply; and they have shipped them back to the United States, which has led to lower prices. That is not the imbalance I am talking about.
The imbalance we are headed for is that they will control state-of- the-art artificial intelligence, that they will control state-of-the- art quantum computing, which will mean that nothing will be encrypted anymore, which will mean that there will be no such thing as secure cars left. One day, the President of the United States will not be able to talk to his national security officials anywhere in the world without the Chinese hearing it. No matter what encryption you will put in, they will break it with a quantum computer. That is the imbalance I am talking about.
The imbalance I am talking about is when, one day, we will have a dispute with China on something--on national security somewhere in the world--and it will threaten to cut off our supply of biomedicines. In essence, it will threaten the lives of Americans in their not getting medicine unless we cave to China's desires. That is the imbalance I am talking about.
The imbalance I am talking about is one where it dominates aerospace, where it is the nation that controls satellites and satellite communication, where it is the nation that controls 5G. We are headed toward autonomous vehicles. Autonomous vehicles will depend on 5G technology. China will dominate the world in 5G, and we will depend on it. So we are going to build a fleet of autonomous trucks and autonomous cars, and none of them will work if the Chinese decided to shut it down because they will dominate that field. That is the imbalance I am talking about.
If this all sounds fantastic or apocalyptic, look it up. Research it. I promise you that you will not find a single person who is versed on this topic who will disagree with what I am saying. This is the threat that we face, and we are not facing it squarely.
I would advise those who cover this issue to stop covering it as a political issue. There are some things that are so important to this country that I don't care what the politics are, and most of my colleagues don't either. These are definitional things that will define the 21st century.
I would advise us not to cover this as a purely economic issue because there is a way to grow the trade gap in the short term. We can sell China a lot more of the things it is willing to buy anyway. It doesn't intend to lead the world in those things in exchange for its dominating us in the long run. Get rid of the short-term thinking, and start thinking our competitor has a 50-, a 100-, a 20-, and a 5-year plan, and we don't even know what we are going to be talking about next week.
It is time to wake up to this threat because we have two ways forward. There can be a balanced relationship between two great powers that leads to a world that is stable and secure and prosperous or we can have an imbalanced world in which the rising power of China is at the direct expense of a falling status quo power in the United States. That instability will lead to conflict and a way of life for Americans that we will find unacceptable. Then it will be too late. Then we will have to explain, maybe, to our children and, most certainly, to our grandchildren why the America we grew up in--that led the world in all of the great innovations and in all of the great ideas, that provided prosperity to millions of people here and around the world--and the America they get to grow up in is a second-tiered power while China dominates everything that matters.
If you think that is not a big deal, one of the reasons democracy has spread across the planet is that the world's most powerful country has been a democracy. If the world's most powerful and dominant nation on Earth is a dictatorship--a country that has no respect for privacy, a country that has no respect for free speech, a country that has no respect for religious liberty of its open people, a country that has no regard for human rights anywhere in the world--what do you think the world is going to look like in 20 or 30 years? It is not going to be a better place.
Democracy is morally superior to autocratic regimes. We should not be afraid to say that. If for no other reason--if you want to put aside economics for a moment and confront it from that angle--we cannot allow an autocratic dictatorship to dominate the global economy and global technology by stealing from us at the expense of the democratic order in the world. Democracies are morally superior to dictatorships. If we allow China to cheat and steal its way into dominance, there will be more dictatorships and fewer democracies on this planet, and we will all pay a price for that.
I urge everyone to take this issue seriously. I urge the President to listen carefully to those in his own administration who understand this threat for what it is holistically, and I urge them to move in a direction that recalibrates the structure of our relationship with China economically and that does not allow not just ZTE but numerous other telecom companies to continue to grow and spy at our expense.
That is what I encourage them to do, and that is the right thing to do for the future of this country, not some short-term deal that makes us feel good and potentially gets a positive headline in the short term but what historians will condemn as the beginning of the end of America's place in the world as its most influential Nation.
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