Return to Transcripts main page
QUEST MEANS BUSINESS
Jack Lew: Trade Agreement Make U.S. Stronger; Chaos Erupts at New Mexico Trump Rally; Chinese Vice Finance Minister Says Trade Brings U.S. and China Closer Together; U.S. Stocks Boosted by Oil Rally; Greece to Receive $11 Billion in Bailout Funds; Netflix Faces Quota for European Content; Whole Foods Targets Millennials with New Market. Aired 4-5p ET
Aired May 25, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN HOST: The bells are ringing. The cheering and I'm not surprised. Look at that green. Two days in a row. Straight
out of the gate. The market rises sharply, and it holds on to those gains, and now the late -- oh. My word. I've come all necessary after that and
that's what you call a thrilling gavel on Wednesday, the 25th of May. It may take me a while to recover from that.
Tonight, Trump, trade and China. We have a special program on the numbers behind the Trump and trade rhetoric. We're also going to talk about the
breakthrough in Brussels on Greece's debt. Belgian's finance minister will be joining us, and think of it as binge watching with a continental flair.
The EU wants Netflix to get more European, and with an hour together we have so much to do. I'm Richard Quest. I mean business.
Good evening. As the rhetoric between Donald Trump and China over trade gets ever hotter, tonight's GUEST MEANS BUSINESS, we're taking a special
in-depth look at the allegations being made by Mr. Trump and trying to get to the truth over what's real and what's campaign hyperbole. With
trillions of dollars in trade deals at stake, the U.S. treasury secretary has told CNN tonight he could do better in defending free trade.
In California Donald Trump's holding a campaign rally a day after he called China the greatest abuser in U.S. history. Tonight, we delve into Donald
Trump's views on China. We speak to the policy-makers on both sides of the Pacific. You're going to hear from the U.S. Trade Representative, Michael
Froman, who tells me trade deals aren't the problem, they are the solution. And China's deputy finance minister, tells me even Donald Trump can see the
benefit in Chinese trade.
In a moment I'll ask the former Ambassador to China, Gary Locke, if Trump can make a deal with Beijing. What's it like negotiating with the Chinese.
First though the U.S. Treasury Secretary has a message for the protectionist, he tells him you're wrong. Donald Trump and Bernie Sanders
both say America's trade agreements will hurt the middle class and kill jobs. Jack Lew was speaking with Christiane Amanpour a short while ago and
he said the U.S. is strong when it's economy is open.
(BEGIN VIDEO CLIP)
JACK LEW, U.S. TREASURY SECRETARY: I think if you look at the period since World War II, one of the things that has led the United States to have the
influence that we have in the world is our leadership in the global economy. Now, the impact on U.S. workers, we know that trade-related jobs
pay higher salaries. We know that the markets around the world that are growing will be less open to the U.S. if we don't have good trade
agreements. We also know that the practices internationally are not going to meet the standards that we think are appropriate in terms of labor
standards and environmental standards unless we have agreements that drive things in the right direction.
In fact, we do, and like the transpacific partnership agreement, have an agreement that drives standards forward around the world. Now, your
question about why that's not seen that way. Obviously trade is always a difficult issue because, you know, it's easy to look at when things are
being sold abroad, and it's easy to inflame sensibilities as if that's the only thing happening. Frankly, we who support trade have to do a better
job making the case that I've made, and also we have to pay attention to things like trade adjustment assistance so that workers who are adversely
affected have the support they need to move forward in their own careers.
Christine Amanpour, CNN ANCHOR: Donald Trump on trade says we are like a third world country. He describes your country, the United States, as
being a third world country on trade saying that America makes the worst trade deals ever. How do you as Secretary of the Treasury respond to that?
LEW: I'm not going to comment on any specific comments being made in the political season, but I would say that if you look at the details of what's
in TPP, for example, The Transpacific Partnership, it has high standards in labor practices, high standards on environmental practices, health
standards. What we would do when we approve TPP is we'll bring the rest of the world up to a higher standard, which we already meet. That means that
will be more competitive.
(END VIDEO CLIP)
[16:05:00] QUEST: That's the scene from the U.S. Treasury. Now, Donald Trump is speaking in California after a chaotic day outside of a Trump
rally in New Mexico. Protesters lit fires. They threw rocks and they smashed a door to the convention center where the event was being held.
Inside, Trump stirred up the crowd by once again referring to a familiar foe, China.
(BEGIN VIDEO CLIP)
DONALD TRUMP, U.S. REPUBLICAN PRESIDENTIAL CANDIDATE: China, which has been ripping us off, the greatest abuser in the history of this country,
China has been ripping us -- and I have many friends in China. They agree with me 100 percent. They can't imagine, they can't even believe that they
can get away with what's happening.
(END VIDEO CLIP)
QUEST: So there you have Donald Trump's fundamental claim, that the U.S. is being ripped off and China is responsible. These allegations may be
popular with supporters, but economists do not think they are 100 percent accurate. Let's start with the question of U.S. manufacturing. The claim
is that jobs have gone, declined by more than 5 million since the turn of the century in 2000, which coincidentally is when China joined the WTO, the
World Trade Organization, 18 down to 12 million.
Even the Fed admitted two years ago, negative and statistically significant relationship and the change in U.S. policy and subsequent employment growth
for manufacturing. So it seems like it's a done deal. China joins, manufacturing jobs go. China's responsible. Not so fast. The economist,
Diane Swonk, says the job losses began well before China came on the scene.
(BEGIN VIDEO CLIP)
DIANE SWONK, FOUNDER, DS ECONOMICS: Really what we've seen is a decline decade in the making. It started back in the 1970s and accelerated into
the 1980s and then continued in the 1990s, even as manufacturing had a resurgence. So laying this all on the door of China alone is sort of
missing the point. We've been in a globalized economy for a long time, and what we've seen is that even as manufacturing jobs have dissipated, things
like the number of vehicles produced in the United States is still very high.
(END VIDEO CLIP)
QUEST: So if manufacturing jobs loss is not necessarily because of China, well, Trump has frequently accused China of being a currency manipulator
making it difficult for U.S. companies to compete. Look at the yuan, the Chinese currency, or the renminbi and you'll see how it has weakened to a
five-year low. Today it's at a five-year low even though the course over the past ten years clearly did suggest that the dollar was in the
ascendancy and, therefore, they were artificially keeping it down. But China spend billions trying to stop the Chinese currency collapsing lately,
and Diane Swonk believes the currency manipulator doesn't tell the whole story.
(BEGIN VIDEO CLIP)
SWONK: Unfortunately, there's sort of a gap between understanding what the symptoms of the problem, is the trade deficit with China is a symptom of a
much larger problem both in the U.S. and China, dysfunctions in both of our economies. And the way to have a more healthy deficit or a smaller deficit
and pivot is for both of us to shift gears, which we don't seem willing to do. Instead, we're taking the path -- we're at a fork in the road. We're
taking the fork in the road we know, protectionism, isolationism, closing down our borders, and we know how that ends. That's a path pock mocked
with land mines.
(END VIDEO CLIP)
QUEST: So you've got manufacturing, and you have a currency question. If you put them both together, well, of course, you know where you end up.
You end up with a trade deficit and over here I'll show you the numbers, the trade deficit. Last night Donald Trump said the trade deficit is $500
billion. The campaign website describes it as $300 billion. The actual number $366 billion last year. But not so fast. The U.S. has run trade
deficits since the 1970s, before China was opened up to U.S. trade, which is why Diane believes it's not about bringing the deficit down, it's how
you do it.
(BEGIN VIDEO CLIP)
SWONK: It's a ruse to say they are a currency manipulator. If they can manipulate their currency to where they wanted it, they certainly wouldn't
have as much capital flight. They wouldn't be dealing with as many problems that they're dealing with right now. Ideally they be in a world
where they move to market reforms and allow their currency to flow. But if that were to happen tomorrow you'd have a major devaluation in their
currency and that would raise the ante on the people arguing with a market move that they were manipulating their currently.
(END VIDEO CLIP)
[16:10:00] QUEST: Let's get perspective on all of this. Those are the allegations. Gary Locke is a former U.S. Ambassador to China. He's also a
former U.S. commerce secretary. He knows this subject backwards. He joins me now live from Seattle. Ambassador, very simply, Donald Trump, does he
have a point that China, I'm not going to necessarily use the pejorative raping the U.S. when it comes to trade as he says, but certainly it's a bad
set of deals.
GARY LOCKE, FORMER U.S. AMBASSADOR TO CHINA: Well, actually, we in America have benefitted from our trade with China. For instance, China is
America's number one export destination for all that we grow and process off of our farms. And so there are in fact millions of American jobs that
depend on export of services and goods to China.
QUEST: But you'll agree -- you will agree that the bilateral deficit with China is heavily weighted in the Chinese favor.
LOCKE: Yes, we have a trade deficit with China, but as your previous speaker talked about and mention the it's much more complicated than that.
We've actually had a U.S. trade deficit with the entire world starting in the `70s, well before China ever joined the WTO. We do have trade
disagreements with China, but we've actually been taking them to the world court, the WTO, much more frequently and we've been winning many of those
cases and forcing China to live by the rules.
That's why, for instance, the TPP is such a strong trade agreement with other countries, which China very much is wary of because this trade
agreement sets a very, very high standard in terms of protection of health and human safety, environmental rules and regulations, which China is
fearful that someday will apply to them and other countries will apply to China and that's why it's important.
QUEST: Well, I said the TPP, China is not part of the TPP. So at the moment China, you know, the argument goes, and we have to put this into the
U.S. political context because both sides, both Clinton, Hillary Clinton and Donald Trump now say they oppose the TPP.
LOCKE: Well, yes, they do oppose it, and I suppose we can say we can always do better but this is in fact a very high standards agreement
addressing many of the concerns that people have raised about making sure that there's a level playing field for U.S. companies when they deal with
producers and exporters and manufacturers and growers, farmers in other countries. That's what the TTP is trying to do to address these concerns.
QUEST: Donald Trump has rightly or wrongly, he has -- he's latched on to something when he talks about China and he talks about currency
manipulation. He talks about disastrous trade agreements. He talks about taking advantage, the biggest abuser of the U.S. Are you saying,
ambassador, he is wrong?
LOCKE: Well, I don't think he's being very accurate about it. I think he's over -- he's very dramatic about all of his statements, but the
reality is that it's so much more complicated than that. We in America benefit from our trade, our exports of goods and services to China, and if
we were to have 50 percent tariffs on everything that's coming from China, China would then turn right around and put similar tariffs on all the
things we send and make and export to China.
That would mean virtually no more Boeing airplane sales. No more GE turbines, caterpillar tractors and things like that that go to China or
medical goods and supplies or environmental technology. So actually what he's calling for would actually end up in a trade war and everybody would
lose in a trade war. And not only would things coming from China be much more expensive for everyday consumers, but a lot of the millions of jobs
from our farms, to our factories and to our high tech industries would be lost, and so there would be a lot of jobs in America that would be at risk
with a trade war that would happen under Donald Trump.
QUEST: Do you think, because you've been -- you were secretary of commerce so you are well aware of the trade -- the significance of commercial trade
with China and as ambassador when you were based in Beijing, ambassador, do you think the Chinese appreciate the rising level of anger that there is
now in the United States over a perception of the U.S. is being taken for a ride?
LOCKE: Well, I think the Chinese have always been aware of the many criticisms against some of their policies and that's why the Commerce
Department has taken them basically to court. Imposed tariffs and sanctions on them for improper subsidies of many of their manufactured
goods coming into China, and so forth, and so we've tried to level the playing field and they have taken notice. But, again, you know, what's
really interesting is that many manufacturing jobs are actually moving back to the United States, because we have low-cost energy. We have a very
adaptable workforce and the cost of labor is now a much smaller component of the cost of making an item, and as wages gun in China, they are losing
that competitive advantage. The low-cost manufacturing work is now moving from China actually down to Southeastern Asia, to Vietnam and other places.
[16:15:00] QUEST: All right, ambassador, thank you for joining us. You've given us that point of view. That's the scene from the U.S. perspective,
so I now turned and I asked the Chinese Vice Minister of Finance about the fairness on the same points that you've just heard Gary Locke answering,
the significance of this trade relationship between the U.S. and China.
ZHU GUANGYAO, CHINESE VICE FINANCE MINISTER: We believe that the majority of the Chinese people and American people support very strong relations of
China and the United States. Last year the trade volume of more than 558 billion U.S. dollars and the FDI already more than 4140 billion, and we see
this very close connection by trade. And investment made in China and the U.S. more closely together.
QUEST: Secretary Clinton and Donald Trump, they both believe that there is a trade imbalance, an unfair trade relationship with China.
GUANGYAO: We have confidence to American people. We know that both Chinese people and the American people benefit from our relations. Even
for Secretary Clinton, that's -- as you say, that's, Mr. Trump, they are two candidates they understand where the real U.S. interest. That's my
QUEST: So you're not worried, for example, Donald Trump saying he's going to increase trade tariffs by 40 percent, 45 percent.
GUANGYAO: If that's the U.S. government policy, we'll seriously treat that. If there's just one candidate for presidential election, we say,
let's let U.S. people to decide.
QUEST: China just can't be a factory of final assembly goods brought everywhere from everywhere else. And you know the issues there. What is
the medium term?
GUANGYAO: Must step aside and reform to enhance the quality of goods made in China, and to forcibly to benefit for the Chinese people. And the
Chinese people enjoy much better income of growth, and then we also share the benefit with all people globally and that's our responsibility. So in
this regard we particularly hold that's the China/U.S. We can work together to build our real model relations of our major economies, our
QUEST: And over the next few days you'll hear more from Mr. Zhu on the questions of the Chinese economy and how the strengths and weaknesses of
that economy and how internally it relates to debt.
As we continue tonight, oil is flirting with $50 a barrel. The good times are far from rolling at Shell. The energy giant is continuing to cut staff
by the thousands. It's QUEST MEANS BUSINESS.
[16:20:35] QUEST: Up nearly 2 percent, 1.9 percent, oil prices are heading to the highest level in some seven months. Brent is just a few pennies
away from $50, and it's all happened remarkably quickly. All of it comes as the U.S. says its crude supplies may have fallen by more than 4 million
barrels in a week. So if supplies have fallen, this is one reason why you're starting to see an uptick in price, but look at the way brent has
moved the oil prices. This graph takes us from November the 14th.
Now this is the precipitous fall. It comes down. This is after the Saudis made their policy, and in `15 we say well and truly down. We get to the
low point earlier this year. It's about 26 and change, I seem to remember, but now you start to get this climb back up again and brent has almost
doubled from those lows that we saw back in January. It's still way down from the high point of over 120, but even so I draw the line across to 50
over here. It's a long way to make up. But it's clearly the momentum seems to be there, and the rise in oil prize gave a big boost to stocks.
Straight out of the gate the market went up and actually with the exception of a small hiccup towards the end, nearly closed at the best of the
session. What is going on? There's a perversion in the market when higher oil prices give a stronger DOW. We've seen this right the way through.
Paul La Monica is here to explain this relationship. Why?
PAUL R. LA MONICA, CNN MONEY CORRESPONDENT: It is a bit perverted, as you point out. I think one of the big concerns that people are going to have
to ask themselves about going forward is consumers weren't spending as much as we thought they would when gas prices and oil prices were a lot lower
than they are now. Are they suddenly going to start cutting back? We've had a lot of retailers reporting lousy results and giving weak guidance and
higher oil prices aren't going to help. Obviously it's going to help some of the workers that may, may eventually get their jobs back. Too little
too late for Shell.
QUEST: But even though allowing for the fact that the oil and energy industry is a sizable part of the markets so, you know, I can't remember
what percentage of the Dow is made up by the oil companies, so that would explain --
LA MONICA: Right, you've got Exxon Mobil and Chevron.
QUEST: That's an element of the component within the DOW. But even so, higher oil prices do take a toll on the economy.
LA MONICA: They definitely do. We've seen what happens when oil prices skyrocketed well above $100 a barrel. I think what people are trying to go
figure out now is what is that happy medium? That proverbial goldilocks- ian type price that will be just right for everyone. It wasn't $28 a barrel, it sure as heck wasn't over $100 a barrel, maybe it's in the 50-
55ish range, we'll have to see.
QUEST: The DOW at 49 and the DOW nearly at 18,000 again. Good to see you sir, again.
LA MONICA: Thank you.
QUEST: European stocks, they finished higher with consumer demand and business confidence figures from Germany and not surprisingly because of
those numbers Germany saw the best of today with the Dax now over 10,000. It was banking stocks which saw a boost on news of a breakthrough in the
debt deal with Athens. It will address Greece's request for debt relief. Eurozone finance ministers they went late into the night. They secured
compromise. It not only gets the Eurozone on board. It gets the money to Greece. It keeps the IMF happy and it releases $11 billion in bailout
funds. It also gives a road map for debt relief down to 2018. The IMF has agreed in principle to rejoin the bailout packages and Greece will receive
the next installment in June. The Eurogroup president, Jeroen Dijsselbloem, sounded pleased with the outcome.
(BEGIN VIDEO CLIP)
JEROEN DIJSSELBLOEM, EUROGROUP PRESIDENT: I think it's an important moment in the long Greek program, an important moment for all of us. Since last
summer where we had a major crisis of confidence between us, that confidence has begun to recover.
(END VIDEO CLIP)
Johan Van Overtveldt, the finance minister for Belgium joins me now on the line from Luxembourg. Minister, always good to talk to you. I'm just
wondering when I look at this deal, I mean, how -- it's fiendishly complicated. How realistic is it?
[16:25:00] JOHAN VAN OVERVELDT, BELGIAN FINANCE MINISTER (via telephone): Well, I totally agree with the Chairman Dijsselbloem. There's still much
work to be done, first of all, by the Greek government but then also by the institutions as they are called, the IMF, the ECB and the European
commission. It's promising that we get this deal together, but like I just said, there's still a lot of work to be done and a lot of things to be
sorted out. Not only in terms of the debt restructuring that we have agreed on and also in terms of follow-up on structural reforms. The
pension system and the labor market, the tech system in Greece and I think that's where the important issues are. We cannot get the Greek economy
growing again if we can get the structural reforms right. We're on the right track but there's still a lot of work to be done.
QUEST: OK, now, I looked at the debt restructuring proposals which are some way down the road. They are bordering on the arcane, this idea of
smoothing out the maturities. I mean, I'll be honest with you, minister. I didn't understand them. Do you?
VAN OVERVELDT: I think I understand them. And you may wonder whether I think or I understand them. But it's complicated. You are right, but
nothing in this whole thing about resets has remained simple. Everything has gotten complicated as usual. Due to a lot of circumstances, but the
important point to note here is that already a lot of things have been done in the past in terms of debt restructuring. The average outstanding time
of the Greek official debt is already close to 30 years. So we can't do much more.
We will do more but we can't do much more and, again, the debt restructuring is important but it's not the major thing. The major thing I
cannot repeat that enough is the structural reforms.
QUEST: But that structural reform is slow and it's on the way, I'll grant you, minister, but even you must agree. The new taxes, the continuing
austerity, there is more to be done and the Greek simply, basically the Greek people are saying they can't take much more.
VAN OVERVELDT: Well, that's a little bit of the history of the past with respect to these programs. Everybody is telling me or a lot of people are
telling me why don't you -- why do you insist on these programs because they clearly have not worked in the past? The answer is quite obvious.
The programs have never been applied properly. I mean, there have been cuts in spending, true. What has been lacking enormously is structural
So it has been an economy not on one leg but on a half leg, and it's really hard, as you probably know, to move around in an efficient way on half a
leg, and that is what has been happening with the Greek economy, and the only way we can get the Greek economy again on a structural growth path and
an agreed economy is structural reforms.
QUEST: Minister, thank, sir. The line is getting a bit crackly. Structural reform is certainly the message we hear from you loud and clear.
Next time I see you we can discuss exactly it a what those debt restructurings are really all about.
As we continue tonight, Donald Trump says the United States is losing to China when it comes to trade. The man responsible for making those trade
deals says the U.S. can't win if it doesn't play. We're going to talk more about Donald Trump and trade.
[16:31:08] QUEST: Hello. I'm Richard Quest. There's a lot more QUEST MEANS BUSINESS as we continue. When we'll be looking at the continental
content in European Netflix. They'll be a lot more of that if the European Commission gets their way. And the supermarket for millennials has opened
in Los Angeles. It's called 365. It's owned by Whole Foods and the chief executive will join us to discuss why millennials need their own
supermarket. Why don't they shop like the rest us do? Before that, this is CNN, and on this network, well, the news will always come first.
At least ten people have been killed in a suicide attack in Kabul. The apparent target was a bus carrying court employees to the Afghan Capital in
a neighboring province. The Taliban has claimed responsibility for this attack only hours after the group's new leader was announced.
An audit shows that Hillary Clinton failed to follow the rules or inform key State Department staff regarding her use of a private e-mail server
while she was the Secretary of State. The Clinton campaign says the secret secretary's e-mail practices were in line with those of her predecessors.
President Obama has expressed his deepest regret to the Chinese Prime Minister Shinzo Abe for the murder of a woman in Okinawa prefecture. A
former U.S. marine stationed at the U.S. air base there is believed to have been responsible for her death.
(BEGIN VIDEO CLIP)
BARACK OBAMA, U.S. PRESIDENT: We did discuss the tragedy that took place in Okinawa, and I extended my sincerest condolences and deepest regrets.
The United States will continue to cooperate fully with the investigate and ensure that justice is done under the Japanese legal system.
(END VIDEO CLIP)
QUEST: Seven people died when a ship packed with migrants fleeing the Middle East capsized in the Mediterranean as these appalling pictures show.
Sailors from the Italian navy saw the vessel turn on its side as the passengers shifted position on deck. Thankfully around 500 people were
U.S. treasury secretary says a Brexit would not end the so-called special relationship between the U.S. and the U.K. In an interview at CNN, Jack
Lew says any trade deal may have to wait if Britain votes to leave the union.
(BEGIN VIDEO CLIP)
LEW: We will continue having the special relationship between the United States and the U.K., whatever decision the voters of the U.K. make, but we
think it's clearly a strong economic and national security interest to keep the U.K. in Europe. Now, we will continue working on trade negotiations
with Europe either way. As the president said when he was in the United Kingdom a few weeks ago, any separate conversation with the U.K. would
have to come behind that.
(END VIDEO CLIP)
QUEST: The U.S. trade gap is growing. In April the U.S. imported more goods than it exported to the tune of $57 billion higher than previously
reported. Of course, the biggest gap between them all was U.S. and China. So Claire Sebastian in the U.S., Matt Rivers in China, they went to
CLAIRE SEBASTIAN, CNN MONEY CORRESPONDENT: in 2015 the U.S. spent more than 480 billion of these on Chinese-made goods.
MATT RIVERS, CNN MONEY CORRESPONDENT: During that same period, China bought just $116 billion worth of American goods. That's a little more
than 750 billion yuan. Part of reason for that disparity is that China can produce many goods much cheaper than the U.S., things like toys and
[16:35:00] SEBASTIAN: Thanks, Matt.
ROBERT DALY, DIRECTOR, KISSINGER INSTITUTE ON CHINA AND THE U.S.: Since the U.S.-China trading relationship took off, certainly most of China's
exports have been at the lower end of the value chain, shoes and apparel, but that's change now. China is also biggest source of American cell
RIVER: Like the iPhone, designed by Apple in California, assembled in China. It even says so on the back.
Well, Apple's CEO has said it's because China's schooling emphasizes specialty skills rather than the cost of its labor. Many in the U.S. worry
more and more jobs are being exported. A new you study by MIT. suggests between 1999 and 2011 about 17 percent of American jobs lost in
manufacturing can be attributed to trade with China.
DALY: Doesn't take into consideration the large number of jobs that benefit from trade with China. Still, there have been job losses. If you
look sector by sector, geographic region by geographic region in the United States, there are winners and losers and the benefits of trade are not
RIVERS: In China, manufacturing jobs and wages have risen dramatically over the last 15 years, although studies show productivity has not kept
pace, and there's a downside. China's carbon emissions have almost tripled since it joined the World Trade Organization in 2001. Beijing's air
quality is classified as unhealthy by the World Health Organization. Many here blame that on the rise in manufacturing.
SEBASTIAN: So I've got the clothes and the electronics from China, but the main U.S. export is a little less portable. Passenger planes and
spacecraft, Boeing saying China will be its biggest commercial market over the next 20 years.
RIVERS: And that's helping fuel a travel boom here. Last year for the first time Chinese airlines offered more flights to the U.S. than U.S.
airlines offered to China. China's own plane manufacturer only unveiled its first large passenger jet last November.
SEBASTIAN: And in return China has helped keep American farmers in business. Last year China bought almost 60 percent of U.S. soybean
exports. Here you go.
RIVERS: While there are many you unknowns ahead in this relationship.
SEBASTIAN: One thing is clear.
RIVERS: Neither the China --
SEBASTIAN: -- nor U.S. --
RIVERS: -- can imagine life
SEBASTIAN: -- without each other.
RIVERS: Matt rivers.
SEBASTIAN: Claire Sebastian CNN money, New York.
QUEST: I'm going to put this into perspective. Welcome to the QMB shipping center. Now, in the first three months of the year China sent
$103 billion worth of goods to the United States, 103 billion. In the same period last year, less than a quarter of it went the other way, as Claire
and Matt were both pointing out. The gap is quite large, and it's growing steadily. The trade gap with China is nearly five times as big as the next
country. China's not yet signed on to or been invited to do what it's been invited but not been signed up to The Transpacific Partnership, the
agreement between the U.S. and 11 other nations around the Pacific Rim.
As you can see from this map, from Canada to Mexico, Brunei, New Zealand, Australia and even Vietnam on board, Malaysia, Singapore and Japan. The
United States hopes it will level the playing field for American manufacturers in an area of the world where low-cost manufacturing has put
the U.S. at a distinct disadvantage. Michael Froman is the U.S. trade representative. The ambassador has just returned from Vietnam, and he told
me it's crucial that the U.S. is not to be cut out of deals in the region.
MICHAEL FROMAN, U.S. TRADE REPRESENTATIVE: It was a good trip from the perspective of TPP because it really underscored the opportunities we have
to open these markets to our exports. Vietnam, a country of 90 million people, growing 6 percent a year, an emerging middle class and the first
thing they want are our products, made in America products. But while our market is already open, we face tremendous barriers in these other markets
and TPP will get rid of them.
So, it was very helpful to be able to see that firsthand, to talk about how raising standards in Vietnam, whether it's labor standards, environmental
standards, putting disciplines on their state-owned enterprises, making sure that their internet and digital economy remains open and free. How
that's going to help set the rules of the road in the region in a very high standard way and that helps bring the message back here of how important
this agreement is both economically and strategically.
QUEST: I realize this is not in your gift, but when do you think Congress will take up TPP? As we get ever closer to November, it becomes ever more
unlikely. Will it be passed and ratified before this administration's finished?
FROMAN: Well, our goal is certainly to get it done as early as we can this year. We're consulting very closely with leadership in Congress, the
leadership of our committees to find the most appropriate window of opportunity to bring it up. And in the meantime we're laying a foundation
of support for it up on Capitol Hill.
QUEST: One of the occupational hazards is listening to your work being roundly criticized. TPP is being beaten up by, obviously, the presumptive
Republican nominee Donald Trump, but even Hillary Clinton has expressed reservations about in some cases for TPP. Do you fear it's going to become
a political football, more of a political football than it already is?
[16:40:00] FROMAN: Well, look, I think the good news again is that the members of Congress were the ones who ultimately have to vote on this.
They are digging in. They are rolling up their sleeves and beginning to see the details. I won't comment on any of the candidates.
I will say one thing. The debate that we're having around trade right now I think is a very important debate, and there's a lot of concern out there
that some countries aren't necessarily playing by the same rules of the road that we are. There's a lot of focus on China, but that's precisely
why TPP is so important, because through TPP we can make sure there's a fair and level playing field for our exporters, for our goods and services
that we make here. And that we raise standards in these other countries around the world. If we cede that role to others they will only making it
more difficult for our own firms and workers to succeed.
QUEST: You know, trade talks are amongst the most difficult and in some cases arcane and esoteric forms of government. I think we can both agree
on that at some level. And so when I see in a presidential election like this that trade is one of the forefront discussion points in politically
fighting rounds. I wonder if something's gone wrong with the current trade negotiations. What do you think is going on?
FROMAN: When you look at the American workforce, some significant part of it is due to automation. Most economists that automation has had a much
bigger impact on job structure and our wages then globalization. Some is due to globalization and some is due to automation. You don't really get
to vote on automation. You don't really get to vote on globalization. But you do get to vote on trade agreements. And so trade agreements become the
vessel into which people pour their broader economic uncertainties and insecurities. And I think it becomes the focus of the political debate for
Ambassador Michael Froman, the U.S. trade representative talking to me from the White House earlier today. Now, the question of trade and Trump is the
subject of our newsletter today or least the "Profitable Moment". "U.S. vs China: A growing trade battle." Today the view is seen from the United
States. Tomorrow it's from China and, of course, a full roundup of other business news. Your briefing on the day and your look ahead to tomorrow.
CNNMoney.com/quest where you can describe to our newsletter.
Well today is the first original Europeans series on the streaming service Netflix. The critics are divided. They European commission can't get
enough. We'll explain after the break.
[16:45:30] QUEST: Netflix is unimpressed with the European Commission. The EU's top regulator is providing a quota for streaming services. It
would force companies like Netflix to produce a fifth of their content in Europe. Netflix already meets the threshold and says the EU quotas won't
help European production. CNN Money's Senior Media Correspondent, Brian Stelter. Brian, if they are already meeting it, why is everybody getting
hot under the collar about this?
BRIAN STELTER, CNN MONEY SENIOR MEDIA CORRESPONDENT: Well, that's the thing. Netflix says they are meeting it partly by licensing programming
from the BBC and from others. Perhaps some at the EU would like to see Netflix invest in more. Not just Netflix, also Amazon and YouTube and
other streaming services. The EU's position here is that traditional networks are meeting these thresholds, but online streaming services are
not. And they'd like to see the streaming services catch up. And that includes Amazon and others as well.
QUEST: Who is going to win here because the commission, I mean, you know, the commission usually gets fairly fierce, on these sort of issues,
particularly the French, of course.
STELTER: Yes, and Netflix has already come quite a way. We've seen them produce "Marseille" recently. It's been somewhat critically panned, but it
was produced in France. We've seen them really step up production in other European countries as well. And Netflix is trying to figure out how to
produce all over the world. They are doing some really good things with regards to producing programs that's appealing in all its international
QUEST: But does Netflix have the production budget to make these sorts of programs? They have had notable successes, but as we know only too well,
Time Warner, parent company of CNN, it's expensive to make television, and successful television.
STELTER: The company, Netflix, has said its spending so many billions on television programming for the next few years, but starting to reach the
same point that traditional networks reach, which is not every show is a hit. Some of them are clunkers. And you will wonder if they will think
differently about how to invest in years to come as they learn more about what works online and what doesn't work.
QUEST: Is there any difference that you know of, what works online and what works on network, what works on cable? I mean the argument would be a
good program is a good program is a good program?
STELTER: I think it's as simple as it is mystifying and struggling, which is really truly compelling drama or really truly funny television. That's
really hard to make, but it sometimes looks very easy. And that's why you get so many companies like Amazon and others seduced by the promise of
making original programming. I think what we're seeing right now and for the next couple of years is a reality check about how hard it actually is,
even though it looks easy. Netflix is doing interesting things. You know, they're going to make a competition show where they will produce it at the
same time in six languages with six hosts for six different countries. So that's the kind of thing you could do on a BBC or on a U.S. network. And
we'll see how well that works.
Good to see you, sir.
And we continue. The nickname for Whole Foods, the supermarket is "whole paycheck," and now the supermarket has decided to open an entirely new
branch where they are hoping to target millennials. We'll talk about what's in the shopping cart after the break.
[16:50:43] QUEST: When it comes to shopping, there's the supermarket. Well, Whole Foods wants to get more millennials pushing their shopping
trolleys. Whole Foods is opening its first market specifically targeting the younger set, and of all places Los Angeles. Now, the store is named
365, just like the products you already find in Whole Foods. The Whole Foods products, 365. I assume that 365 days that they are available,
everyday values is the name. The new markets will be smaller. They will be located in cities, and Whole Foods hope they will become more hip.
Ultimately, of course, what they are hoping for, as they ring up, they are aiming for a more affordable image. They want to ditch the nickname "whole
lot of dollars" or "whole paycheck." Now, Whole Foods could use a boost, because whatever the organic nature of the food and the various groceries
in the basket, the stock itself is down more than 20 percent for the year so far, and same-store sales have fallen for the past three quarters, so
let's talk about this with Walter Robb. He is the co-chief executive of Whole Foods, and he joins me now live from Los Angeles. Sir, good to see
you. Thank you, and why Whole Foods?
WALTER ROBB, CO-CEO, WHOLE FOODS: How are you, Richard?
QUEST: I'm very well. But I am curious.
ROBB: You look good with a shopping cart.
QUEST: Well, I get lots of practice despite what people may think. Why do you need this 365? Whole Foods started with the idea of millennials,
yuppies and those who wanted organic stuff. Now you're having to change direction. Why?
ROBB: Well, I wouldn't say it's a change in direction. I say we've been in business for 36 years and very successful over the years, and now this
market continues to grow with a new generation of shoppers. We have a chance to create this new exciting format. I think what we've done with
365 by Whole Foods Market, the first store opened today with long lines, is I think we've created a fresh, new, contemporary shopping experience, very
affordable, super affordable, fun, convenient and lots of technology in there.
QUEST: So how does it differ from the traditional store? I mean, you know, there's a store in the building where I am at the morning, you'll be
familiar with it. I believe it might even be your highest grossing store in the Whole Foods. I mean, I never go down there because the lines are
too long, but that's not the point. How does 365 differ?
ROBB: It differs in that it's -- as you said, it's a smaller store. The selection in downtown L.A., for example, we have 49 olive oils and in the
365 we have ten olive oils. In the downtown store we have a full butcher store and in 365 IS self-serve meat. So it's a very different experience
in terms of the selection, the size and the experience the shopper has. It's an open space, you can see the entire store when you walk in, and it's
a complement to Whole Foods, and we expect both shoppers, shoppers will shop back and forth, and we expect to get new customers with 365.
QUEST: Now the products that are 365 everyday value that you might find in Whole Foods, that you would also find in 365, I assume they will be priced
the same. You're not going to charge me different for the organic honey flakes and oat clusters depending on where I buy them.
ROBB: You would be right about that.
QUEST: Good, because I don't want to waste my time. What about changing the perception? You know the nickname "whole paycheck" and "whole lot of
dollars." You've heard all these jokes and you probably know a lot more, but what about changing the perception of the company? How important is
that for you now as the CEO?
ROBB: Well, I think we're doing a lot at Whole Foods to do that, a lot of movement, a lot of progress on that hand more perhaps than gets reported
out. But I think 365 is a big evolutionary step in terms of saying you can take healthy living, fresh healthy living every day and make it more
affordable and accessible and that's what this format is going to label us to do.
QUEST: All right, sir, I know that the grocery store business is not only one of the most competitive, it's also one of the most difficult, isn't it?
I mean, you've got to be on top of consumer trends, and you believe millennials are now looking for something different.
[16:55:00] ROBB: Well, you know, there's a whole new generation of shoppers that has a different aesthetic and different way of shopping, and
you're right, a whole new opportunity of wanting to bring the quality and standards of Whole Foods Market to a new generation in a fresh way. And so
you're right. It's a very competitive business.
QUEST: Sir, thank you have very much, indeed. Forgive me as we say good- bye as I enjoy your honey flakes and oat clusters. Good to see you sir.
ROBB: Appreciate you bring us on the show. Take good care and come see 365 by Whole Foods Market.
QUEST: Thank you. Profitable Moment, after the break.
Tonight's Profitable Moment. The U.S. trade representative, Michael Froman, speaking on this program tonight summed up why trade is now part of
the presidential campaign. Because he said, at the end of the day it's where the votes are. People don't vote on globalization. They don't vote
on automation. They don't vote on job losses, but when a trade deal comes along they get a chance to have a vote. And that's why Donald Trump has
tapped into this entire issue, trade as it relates to China. On tomorrow's program we'll continue to look and hear from the Chinese as we discussion
whether or not the truth of this trade agreement. This trade imbalance is as a result of an unfair trade relationship, and that's QUEST MEANS
BUSINESS for tonight.
I'm Richard Quest in New York. Whatever you're up to in the hours ahead hope it's profitable. We will do it all tomorrow.