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QUEST MEANS BUSINESS
Istanbul Terror Attack: 41 Dead, 239 Injured; Security at Ataturk Airport Tougher Than Most; EU Leaders Meet Without UK After Brexit Vote; Verhofstadt: UK Will Have to Make a Trade Deal; Lithuania: Renegotiation Would Set Bad Precedent; U.S. Markets Rally After Brexit Fall-Out; CIA: Attack Bears Hallmark of ISIS Depravity; Obama Addresses Brexit at Three Amigos Summit; Deutsche, Santander Fail U.S. Stress Test; U.K. Manufacturers Issue Brexit Warning. Aired 4-5p ET
Aired June 29, 2016 - 16:00:00 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 ANCHOR: The closing bell is ringing on Wall Street. He's doing his duty tonight. Look at it he's got his hand there.
He's ready and raring to go. For good reason, the market is up very sharply. I'll have the numbers for you. I've got a good feeling about
this. Yes, there we go. A firm robust gavel for good reason. The market's up more than 1.5 percent. It is Wednesday. It's the 29th of
In Turkey tonight, of course, the investigation still continues into the attack of the country's biggest airport and the airport's chief executive
tells me the terrorists blasted their way through security.
The EU leaders are sending a message to Britain. A la cart Europe is off the menu. And crisis, what crises? British stocks seem to be back to pre-
Brexit levels. I'm Richard Quest live in London where, of course, I mean business.
Good evening. We will have our business agenda for you in just a moment, but we must, of course, start with the deadly terror attack at one of the
busiest airports in Europe. Istanbul out of Turkey. The airport is back up and running tonight even though three suicide bombers opened fire and
blew themselves up less than 24 hours ago.
Explosions rocked the main international terminal on Tuesday night, 41 people died, 239 were injured. More than 128 people are still in hospital.
No claims of responsibility. The Turkish officials say this is all the hallmarks of an ISIS terror attack. Hala Gorani has just required at
Ataturk Airport and she joins me know. Hala, in the short period you've been there, do you share, for want of a better word, extraordinary
amazement that this airport is up and running again so fast when you remember what happened in Brussels?
HALA GORANI, CNN ANCHOR, THE WORLD RIGHT NOW: Right, and flights starting landing at 2:20 a.m. local. So we navigated really through those areas
that were hit by at least two devastating suicide bombings. Not exactly, of course, where all the damage was done, but certainly nearby. When you
arrive in the area where taxi drivers and tour operators gather to greet people and relatives and loved ones, it is absolutely packed and bustling.
So it's extremely remarkable that so soon after the attacks, very much unlike Brussels, you have a business airport that is functioning almost as
much as normal. And some forensics experts have said to us that they believe that perhaps all of this has reopened too soon. That may be there
would could be evidence that could be compromised here.
We're getting more information on the nationality of the victims. Now of course the majority here were Turks, but at least 13 were foreigners. We
understand, according to government sources, among them five Saudi Arabian's, two Iraqis, there was a Tunisian as well, a Chinese citizen,
someone from Jordan, and China as well. This really is a reflection of the kind of international hub that Ataturk International Airport is. It's the
11th busiest airport in the world and closing it for an extended period of time like the authorities in Brussels did, might not have been workable,
but at the same time resuming business as usual as quickly as they did certainly raise some eyebrows.
As far as how the attackers pull it off -- underlining there's no claiming of responsibility -- suspicion is directed toward ISIS. They did not have
to go through an extra added layer of security to get to the arrivals hall and greet loved ones and relatives. So that's potentially how two of the
three attackers were able to get inside the building, Richard.
QUEST: Right, so just to clarify on that, Hala, because we're going hear from the chief executive of the airport in a moment or two, if you can hear
me, Hala. So you're saying, two of them did go via the arrival section, not the departure section where there is that extra layer of x-rays.
That's what we believe happened.
GORANI: Those are some of the reports we're getting. Initially there was a report was said that one of the three detonated in a parking lot in order
to create confusion so that the two others could go in. One at the departures hall, one at the arrival hall. Now it appears as though perhaps
the third one -- and I don't know in what sequence of events this happened -- it might've been closer to the arrivals hall then we initially thought.
I'm sure the chief executive will have more clarity for you on that.
[16:05:00] But what's important to note is based on CTV footage that we've seen at least two were signed the building. How did they get there? What
kind of confusion did they create and chaos did they create to get in there? It seems as though based on some of the descriptions that we're
getting, that at least one of them panicked a bit and blew himself up before he could start mowing people down with his AK-47. So there was some
ineptitude there. But really the important thing to take away from all of this, Richard, this is a soft target. All you need is one of these weapons
and the intent to kill and you will kill dozens of people. So how do you protect an airport like this? I'm very interested in hearing your
interview with the chief executive of the airport here.
QUEST: Hala Gorani, thank you so much. Hala, who is at Ataturk will be there. We'll talk with you later. The attackers were able to overcome
security and the way they did it was by beginning their assault outside the terminal building. The first attacker entered the departure hall and as he
did so, he took out his AK-47. This is the departure hall area, that's here. You have an idea of the three different areas. As he comes in as
the level one entrance, the police officer shot him. This is the police officer that thought he looked suspicious, and went to challenge him
challenged him, and shot him, and he detonated his bomb while he was lying on the floor. The second blew himself up before passing through the
security entrance. The third bomber blew himself up at the entrance to the arrival hall at the lower level. So you get an idea. The chief executive
of the group that operates Istanbul Ataturk Airport, said this was a different kind of attack. Sani Sener joining me on the line, and told me
the bombers were able to get into the terminal despite some of the toughest security measures possible.
SANI SENER, CEO TAV GROUP: Due to the sensitivity in our region our security levels are much higher than the international standards. Ataturk
airport is the last point of departure for many U.S. and European airports. And because of this reason, our security standards comply with U.S. and EU
security standards. On top of it, we have security checkpoints at the entrance at the terminal buildings in Turkey. So from the point of view of
security measures everything was in place.
QUEST: The way in which they were able to get in, you say this was because they basically gunned and fought their way in. They shot their way in.
SENER: Exactly. Exactly. There are security checkpoints in our airport entrance. But these security checkpoints with x-rays and they have guards
there. But they directly attack the terminal building and attacked the security points.
QUEST: This raises an entirely doesn't different and very troublesome set of circumstances. Because it means that even in an airport like Ataturk,
which has a very high level of security against bombers they were able to get in weren't they?
SENER: Yes. Actually the perimeter of the security, which we can extend. We extend it to the airports. We extend it to security at the entrance.
What we could not extend security perimeter to the whole city. And this is what we could do and you're right. It was a different kind of attack.
They attacked the airport. The airport was under attack.
QUEST: What would you do differently now, bearing in mind the complexity of this issue?
SENER: In our airport we have two kinds of security. One is the private security, which belongs to us, the airport operator. The other one is the
state security officers. So the state security is responsible for the security of all the airports. We have the proprietary airport and the
other is the security officers. So the state security is responsible for the security of all airports. They're taking now precautions in the
entrance of the airport. So they're checking all the cars and passengers entering to the airport. So as much has been the entrance, we continue to
make our security with the higher levels.
[16:10:00] QUEST: The CEO of Ataturk airport. Joining me now via Skype from Madrid is Taleb Rifai, the Secretary-General of the U.N. World
Tourism Organization. Secretary-general, you and I have talked far too many times where tourists, where passengers, the traveling public have been
bombed, blown up, and murdered. And there is no obvious or easy solution, is there?
TALEB RIFAI, SECRETARY-GENERAL, U.N. WORLD TOURISM ORGANIZATION (via Skype): It doesn't seem to be, Richard. It's very sad that were talking
too often, but it's a pleasure to be talking with you. But what happen yesterday also just proves that what we're always talk about, which is that
we need to be together in this. We can't be alone. We can't isolate the destinations. We have to cooperate together.
QUEST: What does that mean in reality, bearing in mind in this situation where the gunmen start off with -- well, the terrorists start off with
Kalashnikovs and then blow themselves, it's difficult to say you can have a parameter short of searching everybody as they get to the airport. And
that's just not practical.
RIFAI: Richard, I'm not a security expert and I don't find myself very comfortable going into the details that you're by far much more experienced
in it than I am. I'm saying there are two things that happened that are very, very promising in some ways. Some sad situations can result in some
positive aspects. First of all, the speed within which the Turkish authorities were able to open the airport. Actually defeated the
terrorists. What they wanted to do was to cripple forever the Turkish economy and forever throw a strong bank to this airport. They were not
able to do this. In less than 24 hours, the airport is up and running and everybody is going there with much activity as there was before.
But the second very important development that's happened yesterday and this afternoon is the fact that the Russian government declared that it no
more is insisting on a travel ban to Turkey. It's the best reaction that any government could make in face of attacks like this. It's absolutely
crucial and important that we do not victimize and punish the victim and reward the aggressor. That's exactly what is happening now, which is
excellent because we are reacting to it the correct way.
QUEST: Do you have any thoughts about whether there needs to be some form of -- some sort of meeting, some sort of bringing together of tourism
executives and officials to really examine how to handle these existential crises when it comes to terrorism?
RIFAI: We're already doing that, Richard. You're absolutely correct. If you think about it, what's been targeted so far have been airports, hotels,
beaches, restaurants, places where people gather. They're all tourism targets. We are at the forefront of this fight, Richard. That's why we're
always calling and have succeed finally bringing together parties that are in charge of tourism, private sector, and security officers. We need do
this together. Tourism officials and tourism stakeholders must have a seat on the table. They cannot just be spectators the all of this.
QUEST: Taleb, thank you for joining us, secretary-general. As I always say to you in these circumstances, we should speak on happier
circumstances. Thank you, sir.
And I need to bring you some video that's just arrived at CNN. I'm afraid it shows one of the terrorists in the attack. The close circuit television
shows the terrorist running through the airport pointing his assault rifle during the attack. The man then later blew himself up.
Some news happening in the last few moments. I'm going to quickly go through these news lines. President Obama says that the Brexit process
does not have to be one of panic. The U.S. President says the leadership issues will have to be resolved for Brexit to happen efficiently, and he
promises that the U.S. will help in any way they can. All the way the council president, Donald Tusk, says there will be no single market a la
cart and Angela Merkel says the U.K. can go cherry picking. Britain is remaking its relationship with the European Union.
QUEST: So the president of the United States has been talking. Barack Obama has been giving programs some of the strongest words he's said so far
in the post-Brexit world.
With respect to Brexit, I think it's important to point out that those who argued about leaving the European Union are the same folks who the very
next day are insisting, don't worry, we're going to have access to the single market. So apparently their argument was not against trade
generally. They just didn't want any obligations.
[16:15:02] That issue of no obligations is exactly the issue that now faces the European Union versus the United Kingdom. The United Kingdom was the
significant empty chair at today's meeting of the Union leaders, EU 27. As the remaining heads of government gathered, without Britain for the first
time in 48 years. Over breakfast, they laid out their terms I had of the divorce negotiations.
(BEGIN VIDEO CLIP)
DONALD TUSK, EUROPEAN COUNCIL PRESIDENT: We have made it crystal clear today that access to the single market requires acceptance of all four
freedoms including freedom the of movement. There will be no single market . la cart.
(END VIDEO CLIP)
QUEST: The obligations the single market in the days and weeks and months ahead as European Council President, Donald Tusk made clear. Preferential
access comes with various responsibilities and won't come without first accepting fundamental EU rules. Now, over the months ahead you and I are
going to talk about these many, many times. This is the single market and the pillars represent the four freedoms. The first freedom, the freedom of
goods to go around the 500 million people's trading blocks. Tariff free trade within the entire common market of 28 countries plus those who have
also signed up like Norway and Switzerland.
Freedom of services, companies can operate anywhere in any EU country. It removes barriers, it removes borders. EasyJet uses the services for
example. Banks have passporting. If you're a bank in London, you can do business in Madrid, you can do business in Stockholm.
The controversy one, freedom of people. EU citizens can move freely between member states. They can live, work, study, and claim benefits --
which is half the problem -- wherever they choose. And then you've got the freedom of capital. Citizens can open bank accounts. They can invest and
buy property abroad. EU companies can invest in their own and other European companies. These four freedoms are the pillars and any
controversy that will exist in the negotiations as Britain determines its new relationship with the single market. The Austrian Chancellor,
Christian Kern, says the UK cannot expect continued access without paying a price.
CHRISTIAN KERN, AUSTRIAN CHANCELLOR (through translator): One thing is clear. If there's a new arrangement in our relationship, which entails
positive rights, then some duties will also have to follow. We'll be very clear about that. There cannot be a one-sided agreement.
(END VIDEO CLIP)
QUEST: The U.K. obviously wants capital. It wants services and it wants goods. It is people, the freedom of movement of people and labor that is
the controversial part. Guy Verhofstadt, that is the president of the Alliance of Liberals of Europe, the former Belgium prime minister. He told
me that if Britain can't accept the four pillars it will be forced to cut a deal like any other trade country.
GUY VERHOFSTADT, PRESIDENT, ALLIANCE OF LIBERALS OF EUROPE: We need to go to a trade agreement between the European Union on the one hand and Britain
on the other hand. What's not possible is to say, OK, we're going to go beyond a trade agreement. We're going to ask Britain to enter, for
example, in the European economic area. And then to say, OK, but in this European economic area, there's no freedom of movement for the labor forces
for example. That is not possible. Freedom of movement for people, freedom of movement of labor is a fundamental principle of this European
economic area. And if Britain cannot accept that, then it will be necessary to fall back to an ordinary trade agreement as the European Union
has with other countries.
QUEST: And in that situation, how do you prevent vengeance? How do you prevent revenge? How do you prevent those in the commission from basically
taking out frustration on the U.K.?
VERHOFSTADT: I think it should be a very bad start to be frustrated by this. I look to the vote in Britain. I'm upset by this vote. It's
weakening the European Union, mostly geopolitically. We are divided now. But, OK, we have to respect the vote of the British citizens. So better
than to be frustrated by it.
[16:20:04] Let's look to the positive side of it. It created first of all the opportunity to reform the European Union. To make -- to really
eliminate the loose confederation of nation states we have today. And secondly we can finally deal with this problem. We can redefine our
relationship with Great Britain. Because let's be honest, this relationship with Great Britain has been a topic of debate and a point of
frustration for nearly 40 years.
Guy Verhofstadt of the parliament, and keep in mind the single market with the four pillars. Most in Brussels and London agree that EU and the UK are
better off with the closest possible economic ties in relation to these freedoms. When the negotiations get under way to refine the relationship,
there are not many options on the table that will allow all to continue in a sort of relatively pain-free way. The starting point is often regarded
as the Norway model, membership of the European economic area.
Norway, however, gets all those four freedoms. It has to take freedom of movement of labor. It also pays into the EU budget. And it has no input
into making any laws. Essentially it basically gets the benefits with no say so and pays a price with freedom of movement. But the U.K. wants the
modification. David Cameron wants immigration controls in the post-Brexit Britain, which of course is absolutely an anathema to freedom of movement
of labor. And the way it's been put by Angela Meckel, you can't cherry pick. You can't take -- you can't expect the obligations to go away, but
still get the privileges. In other words, you can't take services, goods and capital and just leave freedom of movement of labor behind.
[16:25:02] The president of Lithuania says any negotiations with the UK would set a bad precedent for other EU members. I spoke to her on Tuesday
and asked her, the president, what she thinks a final deal would look like.
DALIA GRYBAUSKAITE, PRESIDENT OF LITHUANIA: The first can't be the case. We do not know what model we can use. So, yes, where relations with
Switzerland is very specific. Where to model our relations, we do have a vision model of relation, where anyway to access the single market you need
at least four freedoms to be included, including free movement of labor and people. Which is very much unacceptable now it looks like for Britain.
QUEST: Can you do a deal on that?
GRYBAUSKAITE: I don't think that countries would prefer to do this, because it would set a bad precedent and it can invite other countries to
follow. Because in reality you have everything and no obligations.
QUEST: You all -- and I say this with enormous respect, madam president. You're regarded as hardliner.
GRYBAUSKAITE: Oh, sometimes.
QUEST: Are you a hardliner here?
GRYBAUSKAITE: It depends on what. Opposite, I think I'm not. Because for us Britain is very important. And especially important as security and
So my final question ma'am is -- and I won't hold this against you in three months' time. Do you actually think Brexit will happen or do you think --
and you been around these halls longer than I have -- that there will be a classic Euro fudge and something will be arranged that will allow Britain
to continue either in the union or with a very strong associate status?
GRYBAUSKAITE: I would prefer this very much what you said now. But I'm not sure it will happen. Because the process of Brexit was cooking for a
long time. Their population was prepared and successful, let's say failures of politics inside Britain was blamed on Brussels. This is going
ten years minimum or 20, and why the Brexit was deeply rooted and we need some time for everybody to understand. Because if you change now or nobody
will apply for 50 article and we say, OK, welcome back. This will not work because people mentally already made a decision. There was in the very
beginning a mistake to put such a question on the referendum I think. In the very beginning again, because of the purpose of fueled ambition and
battle inside one of the political parties in Britain. But after everything done, you cannot ignore people. You cannot ignore environment
in which it was done. And everybody needs to pay a price.
QUEST: That's the president of -- talking to me earlier in Brussels. The London FTSE has erased all the losses since Britain voted to leave the
European Union. It was up more than 3 1/2 percent today. It's now 22 points higher than it was on the day of the Brexit vote. The U.S. markets
also saw their second biggest day of gains. Paul La Monica is in New York. Paul, how come the markets in New York opened out of the gate sharply and
never looked back?
PAUL R. LA MONICA, CNN MONEY CORRESPONDENT: I think investors hopefully are calling it right, but I don't know for sure. They clearly have fewer
concerns about the Brexit right now. You alluded to the possibility of a classic Euro fudge. And maybe that is what investors are pricing in now.
That you won't have a full blown exit from the EU and that could be good news for the entire stock market. I think investors also realize that
maybe some of the big U.S. banks got hit way too hard because of the Brexit concerns. Clearly it's going to be a problem, but not to the magnitude
that investors were thinking earlier in the week.
QUEST: I can understand the reasoning behind this, Paul. Because in some cases -- in some way this isn't going to happen tomorrow. It's not going
happen next month. And it's not can happen for two years, but, Paul, the uncertainty hasn't gone away.
LA MONICA: Oh, without question. And we know the Wall Street axiom about how invests hate uncertainty. I think that investors though are just
trying to digest what happened last week, what it means, and as you point out, how long it's going to take to unfold. By the way, there are other
things that investors are soon going to be focusing on more as well. We have a big jobs report in the U.S. coming next week, the election a big
concern. And China's economy is still a big question mark.
QUEST: And Paul La Monica will be there to cover them all for us, thank you very much indeed, Paul.
[16:30:00] Just one other aspect just to bring you before we go to a break. President Obama said something very interesting when he was with the Three
Amigos. He said, I think there's some general longer term concerns about global growth if in fact Brexit goes through. Interestingly he added the
word "if" Brexit goes through. What does he know that the rest of us don't? When we come back. We'll be back in Istanbul and look at the top
story on the terror attack in that country. The cleanup goes on at Ataturk Airport. And will have to you the very latest on the investigation. Good
evening to you.
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment when the French nationalist, Marine Le Pen tells me France
could be the next to leave the European Union. And as the three amigos try to navigate the post-Brexit world, I speak to the former commerce
secretary. All of that in this is CNN. And on this network the news always comes first.
Istanbul Ataturk airport is up and running tonight following the terror attacks that left 41 dead. There has been no claim of responsibility but
Turkish officials suspect ISIS is responsible. Chief executive of the group that runs Ataturk says that the attackers were able to shoot their
way into the terminal building. Speaking to me on QUEST MEANS BUSINESS, Mustafa Sani Sener says the airport has extremely strict security
(BEGIN VIDEO CLIP)
MUSTAFA SANI SENER, CEO, ISTANBUL ATATURK AIRPORT: Due to the sensitivity in our region, our security levels are much higher than the international
standards. Ataturk airport is the last point of departure for many U.S. and European airports. And because of this reason, our security standards
comply with the U.S. and EU security standard.
(END VIDEO CLIP)
QUEST: Investigators have been able to download data from the flight data recorder of Egypt flight air 804, and the preliminary information shows the
lavatory and smoke areas are actually true. Wreckage also shows signs of high temperature damage and soot. It could be evidence of a fire aboard
the plane before it went down in the Mediterranean more than a month ago. Of course, the cause of that fire is absolutely unknown at the moment.
EU leaders met in Brussels for the first time since the Brexit vote without the British Prime Minister David Cameron, the e-27 laid out their terms for
future negotiations, agreeing Britain must accept full free movement of EU workers to get full preferential access to the single market.
[16:35:07] The director of the CIA said the Istanbul airport attack bears the hallmarks of ISIS's depravity in his words. Joining me now in London
is Farwaz Gerges, the professor of international relations at the London School of Economics and also of ISIS.
QUEST: Good to see you, sir.
FARWAZ GERGES, PROFESSOR, LONDON SCHOOL OF ECONOMICS: Thank you.
QUEST: Do you agree this has the hallmark of ISIS?
GERGES: I think so. You have two major suspects. You have ISIS and the militant Kurdish. The reason why I think it's ISIS is probably because of
what's happening on the scene, the Turkish borders. This is very existential to the border. Turkey is really the lifeline of ISIS, the US
led coalition with the recent support of Turkey are trying to expel ISIS from the Turkish Syrian borders and this basically would cut the umbilical
cord for ISIS to the world, foreign fighters, money, resources, what have you.
QUEST: But how does blowing up this airport strengthen that umbilical cord hundreds of miles away on the border, or indeed affect the facts, for
example, that they lost Fallujah.
GERGES: First of all, you're asking a rational question and you expect the ISIS and various networks to think rationally, point one. Point two the
strategic goal of ISIS is to increase the costs for Turkey. The most daring and the most ambitious operation striking at the very heart of one
of the most important commercial and symbolic targets in Turkey. The message is near and far. We're paralyzing your economy further, we are
bleeding you and we have already as you know in the last year have already paralyzed the Turkish economy.
QUEST: SO when you say this is the hallmark of ISIS maybe because I spent most of my life covering business economics, is there a mastermind
somewhere that is controlling and saying, OK, now it is time to bomb that particular target or are these renegade groups that have a loose
affiliation, they claim to be doing it under the ISIS umbrella?
GERGES: No. I think there is a strategic vision. ISIS has a strategic vision and if you look at it carefully, at the types of operations that
ISIS has carried out in Turkey, they were systematically sending messages to Turkey, whether attacking Ankara or they attack the Kurds or they attack
QUEST: Who's "they"?
GERGES: ISIS and the various networks that exist in Syria and also exit in Turkey. One particular point is very important for your viewers, Richard,
ISIS has major networks in Turkey. For the last four or five years Turkey has been a way station for ISIS, bringing in foreign fighters, resources,
ammunition, what have you, thousands of supporters. These are facts. We're not speculating.
QUEST: Right. But then, now, Erdogan has to decide -- the president has to decide how to respond.
GERGES: And what did he say? Now the fight against ISIS is our first priority. The first time.
QUEST: How do you take that fight to ISIS? If you haven't been successful so far and they're able to commit an atrocity on the level of the airport,
what do you do?
GERGES: First of all, it is all out war, make no doubts about it now. Because ISIS is striking at a very -- the nerve center of turkey. I'll
tell you what I do if I were Erdogan. If you want to deliver a hard blow to ISIS, you want to basically expel
ISIS from the Turkish Syrian borders and that's exactly what's happening as we with are talking in particular Manbij and Jarablus. Because without
Turkey, Richard, without Turkey --
QUEST: Who do they expel? How do they identify, who do they know to expel?
GERGES: There's no confusion here. We know ISIS as an organization has control of several cities and towns on the Turkish Syrian borders and
Turkey has been one of the most important way stations for ISIS to bring almost 60 percent of foreign fighters have come through Turkey to Syria,
money, resources, by cutting the umbilical cord, you're delivering a harder blow before the beginning of the end.
QUEST: We could talk a lot more to talk a lot more but unfortunately we have another thing to attend to tonight. Thank you very much indeed,
wonderful to have you on the program giving us that perspective.
GERGES: Thank you.
QUEST: The deadly terror attack in Istanbul was most certainly on the agenda at the three amigos summit in Ottawa. President Obama who is
meeting the leaders of Mexico and Canada, now it's the President's last summit with the north American leaders. He's been stressing the importance
of free trade. He said a few moments ago there may still be consequences for the U.K. to leave the European Union.
(BEGIN VIDEO CLIP)
[16:40:00] PRESIDENT BARAK OBAMA, PRESIDENT, UNITED STATES: I think there are some genuine longer term concerns about global growth if, in fact,
Brexit goes through and that freezes the possibility of investment in Great Britain or in Europe as a whole. At a time when global growth rates were
(END VIDEO CLIP)
QUEST: Carlos Gutierrez is the former US Commerce Secretary he joins me now from Washington. Mr. Secretary, we have so much to deal with that we
need to get at it at a fair old clip. First of all, sir, how concerned are you about the Brexit vote and who suffers most? I suspect you're going to
say the U.K.
CARLOS GUTIERREZ, FORMER US COMMERCE SECRETARY: I'm concerned because it's a very important event. I believe the U.K. is going to suffer the most.
The U.K. economy is going to take a big hit. I know this was a very emotional decision, a political decision, but I'm not sure that the
electorate thought through the economic ramifications. Britain is going to go through a very, very tough two or three years and who knows if that will
change the composition of the support from Brexit.
QUEST: But what about the other side of this, of course. I mean the clear message which the EU is now having to deal with is there has to be reform
of the union and they, too, are worried, are they not, about right wing extremists, trade relations, they have their own concerns.
GUTIERREZ: Richard, you're absolutely right. There are two sides to this, one is the U.K. has just shot himself in the foot or you can say has just
administered a self-inflicted wound. Whatever you want to use. But there's also the side of the European Union. The design of the European
Union. And I think that's where the problem is. I think the Syrian refuges and immigration and all of these things are symptoms but the real
issue here is the design of the European Union. My sense is they overshot. The best model for me for the U.K. would be Canada and the U.S., be a
strategic partner. Trade but don't cross the line in becoming a political association because then you get in the kind of trouble that you're getting
QUEST: When President Obama said the U.K. goes to the back of the queue and Donald Trump says he'll be the first person to give the U.K. a good
trade agreement, whose side are you on? Not on a political aspect of Trump versus Obama, but on the issue of where should the U.K. stand in a trade
agreement with the U.S.?
GUTIERREZ: I think that should be a number one priority. I thought it was very important that Boris said, you know, this doesn't mean that we're
withdrawing from the world. We want more agreements. We want to be more international, be out there. I think that's very important. I was
surprised at Donald Trump's glee over what's happened in Europe and what's happened to Brexit. Again, I think he's looking at it emotionally from the
standpoint of sovereignty, from the standpoint of immigration, all of the things that he's against. But he's not thinking about the core of the
issue of what's going to happen to the U.K. economy?
QUEST: We have to finish with this question to you, sir. The truth is globalization, global trade, whatever you want to call it, the things
you've negotiated and the things that you've dealt with in your career, they are now dirty words.
GUTIERREZ: It's very unfortunate. You're right. We've going through one of those periods, I think we have been in one of those periods for about
ten years. But what is happening today, Richard, is regionalization, as you know Asia is creating RCEP or what people call ASEAN plus 3 or ASEAN
plus 4. That is going to be the biggest regional trading bloc in the world.
The U.S. should continue to expand NAFTA we should continue to seek an Americas trading bloc and this is at a time when the European union project
seems to be dismantling. So I think it's matter of expectations, and if Europe would just pull back a bit and think about a strategic but
commercial relationship, stay out of people's budgets, stay out of -- stay out of the borders, stay out of all the regulations that attack or that
make people feel that their sovereignty is being attacked.
[16:45:00] QUEST: Sir, that's a controversial issue for another day that you and I will have to discuss in the future, which is an excellent reason
to have you back. Good to see you, Mr. Secretary.
GUTIERREZ: Thank you.
QUEST: Thank you very much. QUEST MEANS BUSINESS. all the different arguments, all the different points of view, all the discussion points.
You can guarantee they'll be here on this program.
QUEST: Breaking business news. Deutsche Bank and Santander have failed the stress test by the U.S. Federal Reserve. The Fed said it found broad
and substantial weaknesses in the U.S. subsidiaries of Deutsche and Santander in their capital planning processes. Now the big banks, the big
U.S. banks, Bank of America, Citi group, JPMorgan Chase, Goldman Sachs, Wells Fargo all passed.
Paul La Monica is in New York. How serious is it that Deutsche and Santander failed?
LA MONICA: I don't think it's that serious, not at to be glib. But I think investors were braced for this. These are two banks that have been
underperforming. They failed last year too. It is serious they haven't gotten their act together. But I think investors were a lot more worried
about whether there would be a shock with one of the big major US banks.
And we didn't get that. Morgan Stanley sort of passed conditionally but they're boosting their stock buyback and dividends and investors like that.
QUEST: But at this stage of the recovery and the fact that any major bank other than Scooby-doo bank in the middle of nowhere should fail a fed
stress test. I can hear viewers sort of saying how does the U.S. subsidiary of Germany's largest bank fail a stress test?
LA MONICA: It is shocking, you would have thought Deutsche Bank and Santander having learned from last year would have finally done what was
necessary to improve the books in the US for this subsidiary and apparently they have not. I think it is reflective still of some of the problems that
the European banks in general are facing.
Obviously there a lot more concerns about the health of European banks right now with the Brexit than there are US banks. By the way, I would go
to the Scooby-doo bank if they gave out Scooby-doo snacks instead of toasters.
QUEST: I could arrange it with you. I'll have a word with the CEO. And finally, Italian banks are very much in concern. Again, what is the
concern post Brexit?
LA MONICA: I think the concern is definitely contagion. That's why some of the Italian bank stocks have been hit very hard. You still have
concerns and worries about how well capitalized many European banks are, and it's starting in Italy. Could it spread to Spain with Santander
failing the stress test? Possibly.
[16:50:01] QUEST: Now you know why we call Paul La Monica the guru. The QUEST MEANS BUSINESS guru.
LA MONICA: You're way too charitable.
QUEST: Good to put it in perspective. Good to see you, sir.
LA MONICA: Thank you.
QUEST: Don't pull the trigger on the Article 50 just yet. That is the message for the U.K.'s manufacturers' body the EEF. I will discuss the
post Brexit reality with the chief executive after you've about had a chance to contemplate and cogitate and "MAKE, CREATE, INNOVATE."
QUEST: Some of the U.K.'s key industrial sectors could be in for a rough ride following
Brexit. The manufacturer's organization says in their words. Mechanical equipment is the most exposed export to the European Union. After that it
is chemicals and aerospace. Joining me now is the chief executive, the EEF, Terry Scuoler. Good to see you, sir.
TERRY SCUOLER, CEO, EEF: Good evening to you.
QUEST: So how concerned are you, bearing in mind everybody is forecasting something like financial Armageddon.
SCUOLER: Well, of course, they are. That's not necessarily the case. Of course, we are concerned, this is not the result that my member companies
wanted. This is not the result the industrial sector wanted but it need not necessarily result in a recession, as a number of people have
QUEST: Now, explain why, bearing in mind, everybody's saying first of all there will be an uncertainty, orders will dry up during that uncertainty?
SCUOLER: Of course, there is uncertainty. Uncertainty is bad for investment, bad for business. We are where we are. The issue is we're not
going to go back on this decision, unlike Mr. Obama said, I don't think there is any way we will go back on this. It is going forward and making
the most of it and securing though significantly that trade deal which we referred to earlier in terms of our ongoing trade not just for the 27
remaining but the rest of the world.
QUEST: Right now, assuming with the EU and 44 percent of our exports go to the EU, assuming we do not get free access to the single market, what sort
of level of tariffs can your members withstand?
SCUOLER: That is a very difficult question to answer. I think as part of this negotiation our negotiators when they're appointed, when Article 50 is
invoked, it's one of the key tenets looped to secure as free and as open as possible an access to that market.
QUEST: But if we don't accept freedom of movement of labor, that's not going to happen.
SCUOLER: Who says?
QUEST: Angela Merkel says, Donald Tusk says, 27 of them said today.
SCUOLER: And if I were opening a negotiation, that's exactly what I would say.
QUEST: So when the Prime Minister was asked in the House, how many countries have free access to the single market without freedom of movement
of labor, he said none.
[16:55:00] SCUOLER: That's not strictly true because, of course, Switzerland, Norway have certain deals. And remember, the British economy
is the fifth largest in the world. We're 10 or 12 times the size of those two models. And I would further point out I do not believe for a moment
that notwithstanding the risk here that those 27 nations with whom we have an GBP 80 billion deficit in goods do not wish to trade with us.
QUEST: Finally, can your members survive in tariff environment with Europe?
SCUOLER: That depends entirely what that tariff environment is. I hope there will be no tariff environment, if there is, I hope it will be minimal
and I hope at the end of the day, we all hope for an open market. And remember, the other thing is that we need -- we need to a degree free
movement of labor for our skills base, which is so important for our engineering businesses.
QUEST: Please, as the negotiations carry on, will you come back and talk with us?
SCUOLER: Be pleased to.
QUEST: Thank you very much. We will have a Profitable Moment after the break. QUEST MEANS BUSINESS.
QUEST: Tonight's Profitable Moment. To listen to the European Union, it's all over, don't bother shouting no free access and you've got to take
freedom of movement. To listen to the British government, we better get the whole lot or it will
all go down. I ask you tonight to remember one thing. These, as you heard our previous guests say, these are opening negotiating positions. This has
got a long way to go. I guarantee you at least two years.
That's QUEST MEANS BUSINESS for this Wednesday night. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable.