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Published 16:11 15 Oct 2017 BST
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Prior to Sir Alex Ferguson's first experience of Ronaldo, Houllier had witnessed what he could do but agreed with the club's stance on not budging in relation to the player's salary demands.
"I saw him in the Toulon Under-21 tournament and we went for him," said Houllier, who managed Liverpool between 1998 and 2004.
"But we had a wage scale and we weren't paying the sort of salary he wanted.
"Then Manchester United played a friendly against Sporting Lisbon and all their boys said to Sir Alex Ferguson: 'You have to sign him'.
"But I agreed with not breaking the wage structure. I thought it would cause problems in our dressing room.
"Maybe we would have won the title with Ronaldo, but we had Harry Kewell, who was outstanding at the time and was very hungry but got a bad injury.
"After that, he never had the same confidence, the same appetite."
Ronaldo, meanwhile, went on to sign for Manchester United for £12 million and scored 84 goals in 196 appearances at Old Trafford, persuading Real Madrid to offer £80 million for his services in 2009.
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