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QUEST MEANS BUSINESS

U.S. Puts "World on Notice" Over Trade; PSA Boss Confident Despite Global "Chaos"; Brazil in Worst Recession of Its History; WikiLeaks Says CIA Hacks into Phones, TVs; Trump Hails New Healthcare Plan

Aired March 7, 2017 - 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 ANCHOR: Push the button, ring the bell. Trading comes to a close. The Dow is down just 37 odd points on what's

been a fairly quiet for lever type day on the markets. Come on, sir. Oh, that was all very restrained and moderate. But it did bring trading to an

end. Today is Tuesday. It's March the 7th.

Tonight, U.S. Commerce Secretary, Wilbur Ross, puts the world on notice. He tells he vows to get tougher on trade. You watch TV. The TV watches

you. WikiLeaks says the CIA can spy through your appliances.

Also, tonight --

(BEGIN VIDEO CLIP)

CARLOS TAVARES, CHIEF EXECUTIVE, PEUGEOT: The planet is in chaos.

(END VIDEO CLIP)

QUEST: The planet is in chaos in a world turned upside down. Peugeot's chief executive tells us how he'll make Opel into a European champion.

Live from the world financial capital. I'm Richard Quest and I mean business.

Good evening, we began tonight with a warning from the administration in Washington. The games are over. The Trump administration is putting

America's trade partners on notice as the U.S. trade deficit is at a five- year high. The new Commerce Secretary, Wilbur Ross, says there is much work to be done to eliminate the trade imbalance. And already the

administration is taking an aggressive stance against foreign rivals.

The Commerce Department and the Justice Department have just levied a $1.2 billion fine against ZTE. As the Chinese firm illegally shipping

communications equipment to Iran and North Korea. Mr. Ross warned the U.S. plans to step up enforcement of its trade laws.

WILBUR ROSS, U.S. COMMERCE SECRETARY: With this action, we are putting the world on notice, improper trade games are over with. Those who flout our

economic sanctions, export control laws, and any other trade regimes will not go unpunished. They will suffer the harshest of consequences.

(END VIDEO CLIP)

QUEST: Very strong words. Putting on notice. Not go unpunished. The harshest of consequences. Well this is the evidence behind what the

administration is talking about. The new trade numbers gave President Trump ammunition in his claims. You join me in the QUEST MEANS BUSINESS

shipping center.

Now from here we track the flow of goods into and out of the United States. So, beginning with the exports. The U.S. exported hundred $192 billion

worth of goods and services in January. That's a good number and not only that it is up from December. So, remember, 192, but of course, imports.

Now they rose more as Americans bought, particularly, smart phones and automobiles, new cars that were imported. On top of that there was the

crude oil. And as the price of crude went up, it pushed up the value of oil imports too. Factor it all together and the total worth of all the

imports nearly $241 billion.

So, it's classic, the gap between imports and those exports, $48 billion, which is the biggest shortfall in nearly 5 years.

Not surprisingly, President Trump has fixated on the U.S. trade deficit as he seeks to renegotiate NAFTA. The trade deficit is an important part, not

only of his NAFTA argument, but also TPP and why he said it didn't exist, or why it had to be withdrawn.

Heather Long is with me. Joins me to talk about this. During the campaign so much was made about the trade. But if we look at these numbers, there

is a justification surely for what they've been claiming.

HEATHER LONG, CNNMONEY, SENIOR ECONOMY WRITER: Oh, for sure. Look, when the United States runs as big of a trade deficit, last year's was $500

billion and we have the biggest and five years, as you mentioned here in January. That's a drag on GDP. Trump has promised double growth. Do

twice as well as President Obama did. Well, this is going to hurt. This hurts growth. It pulls down because we're not selling as much overseas.

[16:05:00] QUEST: OK. But why is the trade deficit so bad? Is it because of structural factors, such as the high value of the dollar, for instance,

which makes imports cheaper, exports more expensive. Is it simply because, you know, Americans are on a consumer fed binge?

LONG: Well, all those factors come into play, Richard, for sure. So, yes, America loves to buy things, right? And we buy things from American

companies, and we buy a lot from overseas. The reality is our economy is one of the strongest in the world and our people are heavy consumers.

That's what drives our economy. Other economies like a Japan or a China or even in Germany are more export led. So, their economies are pumped by

selling things to us.

QUEST: But can you reverse a deficit of -- although as a percentage of GDP. We've had worse in the United States.

LONG: Right. So were still talking about a number that is slightly below 3 percent of GDP.

QUEST: Which if you go back to the 5, 6, 7 percent of GDPs, which it would have been in the 1980s and 90s. This threatening of say Wilbur Ross --

it's not so much threatening. It's warning. How realistic is it?

LONG: It's very realistic. The reality is Donald Trump believes he was elected president with a mandate to shrink that trade deficit. Even before

Wilbur Ross said what he did today, over the weekend one of his other deputies, Peter Navarro, we've mentioned his name before. He's the head of

the new Manufacturing Trade Council at the White House. He wrote a piece in the "Wall Street Journal" saying trade deficits are a danger to the

United States.

QUEST: But how is he going to do it? How is he going to reverse it?

LONG: Right.

QUEST: You can play with the currency. Which is never usually a wise thing to do.

LONG: And the White House doesn't have huge control over that. So, that's not --

QUEST: What's left?

LONG: Well, what's left is what scares a lot of people and that's what can cause a trade war. So, that's putting those big tariffs on he threatened

during the campaign. As much as a 30 or a 45 percent tariff. That would certainly stop companies from bringing so much like a Walmart, from

bringing so many goods in. The other thing, and it's that wonky thing that you've talked about on the show before --

QUEST: Oh, no.

LONG: -- is that, I know, I hate to even mention it.

QUEST: The border --

LONG: The border tax adjustment. And it's funny today, Richard, you know, Carl Icahn, who is a big Trump advisor and he bought big right after the

election. He believed in the Trump rally. He believed in the Trump pro- growth economy. He pumped money into the market. Well, sure enough he revealed today that he's actually been shorting the market lately. He

thinks it's up to much. And one of his concerns is the border tax adjustment. What's going to happen there? It's unclear it's going to

really hurt. But certainly, a lot of retailers and industries could be heard by that.

QUEST: We'll be talking more about that, the market. Good to see you, thank you.

LONG: Great.

QUEST: Making sense of all that. Excellent. Thank you very much indeed.

Now, staying on this idea of trade and growth, the OECD, the Organization for Economic Co-operation and Development, warns the modest economic

recovery under way around the world is at risk from rising protectionism. And a disconnect between markets and economic realities. The global

economies forecast by the OECD is grow at 3.3 percent. It's slightly faster than last year.

[16:08:15] Angel Gurria, is the Secretary General of the OECD. He told me the world is under performing.

(BEGIN VIDEOTAPE)

ANGEL GURRIA, OECD SECRETARY-GENERAL: What we're seeing is growth is sluggish. That it's 3 percent, 3.3, 3.6 in 2018, and that is still below

the what I would call the cruising speed of the growth of the world's GDP. Even before the crisis it was about 4 percent. So, we're going to be 10

years into the crisis and we're still will not have achieved the growth of the pre-crisis. We have very sluggish trade growth. We have very sluggish

growth of investment. Productivity is really very seriously lacking and lagging. The question of equality, inequality and in many countries the

question of jobs is still a very big challenge. So, the overall context is not an easy one. It is not a very favorable one. It's a very challenging

one, actually.

QUEST: When you look though, for example, the policies of the United States, still the largest single economy in the world, and you look at the

President Trump hoping for 3 to 4 percent growth and the various trade changes that he's making. Are you worried?

GURRIA: The question there is that you have some formulations which drive for more growth. For example, lowering taxes and investing more on

infrastructure.

[16:10:00] Well, this is what has kept the markets going steadily up, but as our chief economist said today which he launched the economic outlook,

he said there seems to be a disconnect between what's happening on the ground and the growth outlook and what is happening in the stock market.

On the other hand, there are number formulations or a number of proposals that have been made having to do with taxes and trade which may actually

not be as positive in some cases be pretty bad for the outlook. So, it's early because you do not have any proposals for legislation. What you have

is a lot of discussion, but of course, the market at least so far has chosen to take those elements that is driving it up.

QUEST: What about this question of world trade? Now look, the trade numbers from the WTO are weak at best. We've got the prospect of a

renegotiation of NAFTA. You've got the whole disruption as a result of Brexit coming along. Is the idea of trade being in trouble worrisome for

you?

GURRIA: World growth normally is about half the growth of world trade. That means world trade should be growing at 7 percent. Is growing at 2

percent. It's not from a few days ago, a few weeks ago, this is something that has been happening. We've only had three occasions in the last 30

years to which the growth of trade was below the growth of the world's GDP. And those three occasions we had flat growth or negative growth.

So, what I'm saying is conditions today are such that we really have a very challenging set of circumstances and we need to apply policy in order to

get it going. It's not going to happen by itself. And some of the options about trade are clearly positive in terms of saying, well, if we're going

to have economies growing faster than were going to have greater demand, et cetera. But today consumption is very low. Investment is very low.

Productivity is very low. So, you don't see where this push is going to come from.

(END VIDEOTAPE)

QUEST: Angel Gurria talking on the question of trade. The chief executive of PSA, the car company in France, says the company is facing execution

risk over a deal for Opel and Vauxhall. Carlos Tavares tell us from the Geneva Motor Show, why he remains confident his purchase is a win-win for

both companies.

(COMMERCIAL BREAK)

[16:15:00] Welcome back with QUEST MEANS BUSINESS. The chief executive of PSA has admitted the deal to buy Opel may prove to be a failure. The

probability we will succeed, but execution remains risky, he says. As Carlos Tavares, and in his world, it is very chaotic. Or his view of the

world is very chaotic, and says, the company needs to stay agile.

Now, Peugeot won the car of the year with its 3008 at the Geneva Motor Show. Eleni Giokos has been speaking to the PSA chief executive in Geneva.

All right, I will forgive you the freezing look. It's something like 46 F, which I'm told is 6 C in Lausanne tonight.

ELENI GIOKOS, CNNMONEY CORRESPONDENT: Yes, that's what happens when you put an African in Geneva. Yes, I'm not coping, Richard. Very cold.

QUEST: Right, so, what did he tell you?

GIOKOS: But yes, so I mean, and as you say, big risk when you buy a company that hasn't been making profits for 17 years losing over $20

billion over that period. There is obviously a risk attached to it. But Richard, you know what, it's also about the price tag. It's what they paid

for that risk. I caught up with Carlos Tavares, to find out whether he thought they got a good deal. Let's take a listen.

(BEGIN VIDEOTAPE)

CARLOS TAVARES, CEO, PSA: It's a win-win for both companies. Each company has its own interest in making this deal. So yes, I think we have a good

deal, as much as General Motors has a great deal. Because we agreed to do it.

GIOKOS: So, tell me about what your strategy is when you buy a lossmaking company. Losing over $20 billion and 17 years. You know, what is the

thinking behind that and how are you going to turn it around?

TAVARES: Well, the strategy is quite simple. We believe that we have the opportunity to create a European automotive champion that guarantee does

not exist. We believe that based on our own experience in turning around the PSA Group over the last 3 to 4 years. We believe that we can help Opel

and Vauxhall to become a profitable and sustainable company using the best practices and the benchmarks that we have in our company. And by doing so

we are going to build a large company with a 17 percent market share in Europe. That will be a very powerful base from which we can of course,

expand overseas. And this is our strategy.

GIOKOS: OK, so what are you going to do to get those efficiencies at play? You got experience in turning PSA around from near bankruptcy to

profitability. You got that from hell from a Chinese investor and the French government. What is it going to take to turn Vauxhall around?

TAVARES: Well, first it takes very simple thing, which is to unleash the talents and the potential of Opel and Vauxhall. We are going to create a

framework within which Opel and Vauxhall people will be able to build their own turnaround plan. Implement your own turnaround plan and be proud of

the success they are going to make.

Of course, they are going to be successful because we are going to share with them all the best practices, all the benchmarks that we have in our

company. And I have no reason not to think and not to trust the fact that we have education, talents, and passion by Opel and Vauxhall to turn around

their own company. So, once we do this, will be a larger, profitable company that will be able to project itself overseas.

GIOKOS: GM had made commitments of no job cuts by the end of 2018 and new investments into the plants by 2020. That's not a very long time. You

know, when it comes to cost efficiencies, sometimes you need to embark on restructuring. I know, you're not going to say that you're not going to be

embarking on any job losses, but what if you can't turn it around and that space of time? What is your game back plan to be?

TAVARES: What you are describing is what we call the execution risk. Yes of course, there is a risk that we could fail. But there is also a

probability that we will succeed. And our job is to make sure that the probability to succeed is bigger than the probability to fail. So of

course, there is an execution risk. But you know, there is something I've learned over my 35 years in the automotive industry is that you always need

to trust people. People are good. People are talented. And my job is to create the framework within which we can unleash the potential of Opel and

Vauxhall teams. And I believe that is possible. So of course, I accept that there is a risk, but I also trust the teams on the fact that we're the

best leadership that we'll have that can succeed. And this is why we are leading for. We are here to help.

GIOKOS: Let's talk about the Iranian business. What is your prognosis there given that there's so much concern about what's happening in the U.S.

closing all borders? Is that going to be a risk for you think?

TAVARES: Well, you know, I think that we need to enlarge this question and think about the whole planet. The planet is a chaos. And my job in this

company that had more than 200 years old, is more than 200 years old. My job is to steer the company over all of those roadblocks and difficulties

that we can face and make sure that the company will be sustainable and of course profitable. This is what we think we can do. We believe we can do

it. We need to recognize that the world is very chaotic. And of course, we need to keep our eyes open and be agile enough to adapt to each

situation.

(END VIDEOTAPE)

[16:20:00] GIOKOS: And steering the company in a chaotic world. And when I asked him about Brexit, he said he'd rather have plants inside of the

U.K. been not have any at all. So, he's not worried about that specific risk, Richard.

QUEST: Fascinating. Execution risk versus a failure, versus probability of success. But the reality, Eleni, is that by buying Opel and Vauxhall,

PSA has started a process which other companies may now feel the need to join in and some form of consolidation.

GIOKOS: Exactly, and we heard that from Volkswagen CEO as well. He said it could spark some M&A activity globally. And you know this is the kind

of talk that I've been hearing over the day as well, that you could see consolidation in the industry not only in Europe but also on a global level

as well. But I caught up with the Nissan COO, and he said it's not just about overcapacity, but it's got to do with something else. And it's got

to do with the money and needs to go into the industry to make it work. Let's take a listen.

(BEGIN VIDEO CLIP)

CARLOS GHOSN, CEO, RENAULT-NISSAN: The industry in general, and it's not only in Europe, globally is consolidating. And it's consolidating, not so

much because of problem of capacity. It's consolidating because of the huge investments which are required to continue to be in business.

(END VIDEO CLIP)

GIOKOS: And the other big thing that we heard today it's about companies working together, collaboration, ensuring that they use the capacity that

they've got to embark on R&D and manufacturing. So, there's going to be a lot of companies teaming up as well, Richard. So, that is also one of the

big trends that we heard coming through.

QUEST: Eleni, go back into the warm. Go and have a hot chocolate. With a bit of schnapps or whatever it is.

GIOKOS: I'm going to go.

QUEST: Whatever the evening inviting in Lausanne. All right, thank you, Eleni Giokos in Switzerland for us.

Now, PSA is only second to Volkswagen as the largest automaker in Europe. I talked to the chief executive of the Spanish car maker, SEAT, which is a

VW subsidiary. He joined me on the line and I asked him whether the PSA deal for Opel is hurting his company's market share.

(BEGIN VIDEOTAPE)

LUCA DE MEO, CEO, SEAT: I think that the European market is actually very, very competitive since many, many years. Especially in the segments where

we compete. But what makes me optimistic about the year 2007 is that SEAT is probably really in the middle of the biggest product offensive we ever

had. So, we launched a compact SUV last year called Ateca. We are now here in Geneva to present the Ibiza, which a kind of a classic of the

house. Historically we sold 5 million pieces of it and 3 million still circulating. And by the end of the year we will be launching another

smaller SUV. So, I think the favor of product lifecycle puts us in a pretty good position to imagine a growth in 2017.

QUEST: In the middle market, is in Europe too crowded?

DE MEO: We have launched it 2013 a car called Leon, really in the middle of the market, and it was surprisingly successful. And the reason for that

is that is say I've been part of the Volkswagen Group, as you know, one of the biggest automotive company in the world. We actually can access state-

of-the-art technology. So, the level of technology and quality of our cars is actually pretty impressive. And it worked really well with the Leon.

It is working very well with the Ateca, which is this compact SUV we launched last year. And I have to say that the most fluid in the most

let's say, attractive part of the market right now is the whole SUV part, which is growing very fast. And we have now a couple of products that can

really play the game.

QUEST: You're quoted from Geneva saying that obviously, Iran is knowing market at what you're looking. But obviously, the cost involved and the

risks involved would mean going in with somebody else. Who would your partner -- would it be within the Volkswagen group?

DE MEO: Well, obviously, it will be in the Volkswagen group but we also say that at the end of the day this is one of the many countries where we

are exploring opportunities around the world. And at the end of the day our priority will be to gain market share in the classic traditional

European market where we are present. Maybe you were looking at South America as an opportunity being a Spanish brand and also on the northern

part of Africa, which may give us some potential in the next year. So, I a lot of work to do on the internationalization of the SEAT brand.

(END VIDEOTAPE)

QUEST: SEAT's chief executive joining me from the Geneva auto show.

The European markets close mostly down. Germany factory orders fell 7.4 percent in January. It's the biggest fall in some seven, eight years.

There's a slump in demand. The FTSE was flat. Everybody's watching in the U.K. the House of Lords, which is amending the Brexit bill. Another

amendment has now gone and has been passed. Which means that there are now two amendments that Theresa May will try and have to get rid of when the

bill goes back to the Commons.

As the Dow falls further beneath 21,000, the markets could be preparing -- well, it's time to put it into perspective. The Trump advisor, Carl Icahn,

thinks it might be a moment of pause or the end of the Trump rally. One of that stock to the watch. Down 10.2 percent, Snap, which is now $21.34 a

share. Still above the IPO price. It was 17, but well below the opening price of $24. This is the second day of the Snap selloff, which was down

10.2 percent. It virtually wiped out the gains.

Paul La Monica, is with me. So, what happened.?

PAUL R. LA MONICA, CNNMONEY CORRESPONDENT: Are we talking about Snap?

QUEST: Snap.

LA MONICA: Did I hear correctly that you set on QUEST EXPRESS, you bought the stock?

I'm not looking to criticize. I just wanted to --

QUEST: No, it's called (ph) show en frogriger.

LA MONICA: I want to get my facts straight. That's all. OK.

QUEST: Yes. I thought that as a test.

LA MONICA: Yes.

QUEST: As a test. We did this once before during the financial crises with Barclays.

LA MONICA: Right.

QUEST: We're going to follow my investment in Snap, just to see how it performs.

LA MONICA: All right, well, we'll see.

QUEST: It's down about 25 percent so far.

LA MONICA: I'm sorry to hear that. And if you believe some of the Wall Street analysts who don't have "skin in the game", the ones that aren't

with the investment banking ties, there are not very positive right now. And I think that's why the stock is falling. Eight analysts have official

coverage on Snap right now. Two outright sells, which is a dirty word on Wall Street. Three underperforms, which might as well be a sell. And then

three holds. So, when hold is the bullish you can get that could be a problem. Although, counterintuitively maybe they're all wrong and this is

the next Facebook and things go sharply higher. But that remains to be seen, but I think investors are just nervous about the losses and the lack

of an apparent business plan to combat Instagram.

QUEST: So, where was the market angst and anxiety? How does everybody get involved in the bandwagon that we saw last Thursday?

LA MONICA: Yes, last Thursday the narrative was clearly different. Everyone was excited I think maybe because of the novelty. It's been a

while since we've had a legitimate tech stock with brand-name recognition for people to get excited about. So, everyone fell over themselves to buy

the stock on Thursday and Friday. Reality set in over the weekend and people realized, OK, because right now this is in Facebook.

QUEST: And one of the important points to make about the difference between Facebook and Snap. Facebook had been going longer. Facebook had 1

billion users. When Facebook IPOed --

LA MONICA: Already profitable.

QUEST: It was already a household name in parts of the world that many of us can't even spell.

LA MONICA: Yes, and as you and I have discussed before, the lack of voting rights for Snap shares is annoying people. And the lack of adult

supervision. They don't have a Sheryl Sandberg yet, or and Eric Schmidt to tell Evan Spiegel, no.

QUEST: We'll talk about it more. Than you.

LA MONICA: Thank you.

QUEST: For reminding me of my losses. Thank you. It's very kind of you.

There are fears that millions of Americans will lose health care coverage. And to the Obamacare replacement plan unveiled by the Republicans. We'll

talk about it after the break.

[16:30:00] (COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, we will have more Quest Means Business in just a moment when we will be live in Rio where Brazil has no entered the

worst recession in its history.

And WikiLeaks is saying the CIA has learned how to remotely control your smart phone and maybe even your television. As we get to those stories,

before that this is CNN. And on this network the news always comes first.

In a surprise attack, Iraqi forces have taken control of Mosul's main government buildings. That means Iraqi troops now have a better foothold

to fight thousands of ISIS militants near the old city. Iraq's prime minister is warning remaining fighters to surrender or face death.

Iraqi Prime Minister Haider al Abadi is going to Washington, President Trump's press secretary says Mr. Abadi will visit the White House the week

after next. The announcement comes the day after the White House removed Iraq from its list of banned countries in Mr. Trump's new travel order.

Another Brexit defeat for the British Prime Minister Theresa May, the House of Lords has voted to give Parliament the final say on how Britain leaves

the European Union. The secretary says the government will seek to overturn the results in the House of Commons.

Poachers have killed a white rhinoceros at a suburban Paris zoo. And then cut off one of its horns. The endangered animals are often targeted

because their horns are believed to have medicinal uses, but it is the first time a Rhino has been killed in a zoo.

A Syrian refugee in Germany has lost a highly-publicized lawsuit against Facebook, he sued after this selfie that he took with the German Chancellor

Merkel was circulated with a fake news story that claimed he was actually a terrorist. He took Facebook to court. The court decided that Facebook did

not participate in what it called the undisputed slander.

Can the CIA turn my smart phone or my television or my Internet connected computer or anything else, can it turn another technology into spying

devices? Well, according to claims laid out in a massive document published by WikiLeaks, that is exactly what they can do. It claims that

malware used by the CIA could circumvent encrypted messaging services like WhatsApp, Telegram, and Signal. CNN has not been able to verify whether

the documents are genuine, and is seeking comment from the US, British and other governments.

Jose Pagliery is our CNN Money cyber security correspondent, he joins me now. The documents reveal what?

JOSE PAGLIERY, CNN MONEY CYBER SECURITY CORRESPONDENT: The documents reveal that the CIA, if the documents are true, the CIA has a preeminent

role as the hacker for the United States of America. We thought that with the NSA, it's the CIA.

The second important thing is that the tools used by the CIA have been stolen, that is what WikiLeaks is claiming, that the only reason WikiLeaks

got hold of these documents now is because those hacking tools were stolen.

QUEST: Now when you say the tools, do you mean the technology to do it or merely the fact that they do it?

PAGLIERY: No, the technology, the weapons are now in the wrong hands. That is what WikiLeaks is alleging. And if that is true it is monumental,

that's why Congressman Ted Lieu of California has already called for congressional investigation to figure out if these tools are now in the

hands of bad guys.

[16:35:00] QUEST: The question of whether the CIA can do it, I mean you are telling me before we came back from the break, the NSA has always been

thought -- well if the NSA has got it, most ordinary people would pretty much say, yes, we can pretty much guess that they have that sort of

capability. Reasonable people would assume that they're watching me do everything whenever I'm doing.

PAGLIERY: But until now we didn't know about it, if the documents from WikiLeaks are true up until now we didn't know that the CIA had that

hacking role for the United States.

QUEST: But what difference does it make whether the CIA has the hacking role, the FBI has it, the NSA providing they are not acting illegally

against U.S. law in executing that

PAGLIERY: That is a great point but there are questions now as to whether or not the CIA shares these tools with the FBI. And if it does that raises

constitutional concerns for that would allow for spying on American citizens.

QUEST: That would allow but I'm not trying to paint you into a corner here, but at the end of the day if the law says you can't do it, then no

amount of having the tools you either do it and break the law, nor you don't.

PAGLIERY: That's right, but the important point here is if these tools are in the wrong hands because that's dangerous.

QUEST: That's what I want to talk about, so who is the wrong hands? What are you hearing?

PAGLIERY: The ways that cyber security tools work, the way that hacking tools work, is that once they are created, anyone can use them, if they get

into the wrong hands, and the wrong hands would be cyber-criminal groups that could use them to steal your money. Teenagers want to break into

other teenagers' personal accounts and expose them and embarrass them online. Or foreign governments that are cracking down on democratic

dissidents.

QUEST: If the CIA or the FBI or the NSA, it doesn't matter who, if they have this capability for which you are talking about, to turn my camera on

and watch me and a spy on me through my television, and somebody has hacked in and stolen it. Will we ever know the truth of this?

PAGLIERY: If someone stole the tool that was used to hacking to your computer?

QUEST: Basically, what I'm saying is the allegation that you have just been telling me about, they've lost the keys to the weapons system, that

they have lost the weapons system, will we ever know about? Will any congressional hearing report ever actually say they did lose those weapons?

Or is it going to be hushed up?

PAGLIERY: You are asking me about the legitimacy of the Republic and whether or not it can do what it hopes to do. I hope that we find out if

they have lost it, and if they do there are technical means to find out who is using it. It is difficult but we will find out, it will just take time,

and a lot of transparency coming from a spy agency that is not used to being transparent.

QUEST: In a sentence, compared to the Snowden leaks, the WikiLeaks dump, Chelsea Manning dump and all of those, where does this lie in the scale of

it?

PAGLIERY: We can't figure out yet until we look through the documents but potentially bigger because the Snowden leaks were about surprise, the CIA

is about damage control.

QUEST: Good to see you sir, thank you.

President Trump sent a ripple through the pharmaceutical stocks, he tweeted about bringing down the cost of healthcare in the United States, and stocks

not surprisingly across the board dipped. He said he was working on a new system where there will be competition pricing for the American people will

come way down is what he tweeted.

The top House Republican has told CNN Americans may have to choose between the newest iPhone and healthcare. Jason Chaffetz was speaking of providing

more low income families with health coverage.

(BEGIN VIDEO CLIP)

JASON CHAFFETZ, CONGRESSMAN, UTAH: And you know what, Americans have choices and they have to make a choice and so maybe rather than getting the

new iPhone that they just love they want to go spend hundreds of dollars on that, maybe they should invest in their own healthcare. They have got to

make those decisions themselves.

UNIDENTIFIED REPORTER: So, in other words for lower income Americans you are saying this is going to require some sacrifice on their part.

CHAFFETZ: We have got to be able to actually lower the cost of healthcare, I mean one of the things we are concerned about his health care inflation

is just consuming the American budget, both in the families and at the federal government. We have to be able to drive those cost curves down and

provide good quality access.

(END VIDEO CLIP)

QUEST: Now he later walked back to the comments saying he believes in self-reliance. Look at the cost of an iPhone versus the cost of

healthcare, the 256 GB iPhone 7 cost $969, an average family healthcare plan for when year cost $18,142 according to one study by Kaiser that was

done last year.

We need to discuss this repeal of Obamacare that has been put on the table.

[16:40:00] The one argument that I'm hearing again and again from Republican congressmen and senators is that losing the mandate to buy

healthcare gives Americans the choice, they can buy healthcare or they can't buy healthcare. But that is the part that makes the whole system

work.

STEPHEN COLLINSON, CNN WHITE HOUSE REPORTER: That's right because you need people committed to healthcare to have a wide enough pool to spread the

risk and make it all work financially. In a philosophical sense, I suppose for conservatives it is true, that if you get rid of the mandate people

don't have to buy healthcare, but then as we say that makes the whole system work. I think we have had a pulsating day of politics here in

Washington since the bill was unveiled. We are learning that this is going to be a heavy lift for the White House and Republicans in Congress to get

this through.

It used to be the one the one thing that united Republicans was to say we are going to repeal Obamacare, now the mechanics of the repeal, they are in

government, it is bringing out these divisions about how to do it. There are significant conservative opposition to this plan basically they say

replacing the mandate and government subsidies with tax credits to allow people to buy healthcare which is what happens in this plan, is just

another entitlement. It is Obamacare lite.

This afternoon we had the president himself come out and throw his prestige and his weight behind his plan for the first time really since he was

president. I think we can hear what he had seen the White House a few moments ago.

(BEGIN VIDEO CLIP)

DONALD TRUMP, U.S. PRESIDENT: This will be a plan where you can choose your doctor, this will be a plan we can choose your plan, and you know what

the plan is. This is the plan. I think we're going to have a tremendous success, it is a complicated process but actually it is very simple, it is

called good healthcare.

(END VIDEO CLIP)

COLLINSON: What we are seeing there is the president really throwing his weight behind this because the White House knows that they have to get this

done quickly because they cannot afford to lose Republican votes to get this passed.

QUEST: I've read as much as I can about the differences between the Obamacare plan and this, the differences are frighteningly complicated, is

about age versus income, it is about tax credits, it is about the level of it, it is about penalties for not having coverage. Is there not a feeling

in Washington, Stephen, legislate in haste and repent at leisure? Unwinding Obamacare is going to take more than just two or three weeks and

a few hearings.

COLLINSON: It certainly is and it is going to consume Washington for months I think that has its own risks for the Trump administration because

it once again onto things like tax reform for example, immigration and Wall Street regulation. You can do that really until it's got this Obamacare

repeal out of the way so that is why it is so urgent for the White House to really get this done. Is going to be done in two stages, you have got the

repeal which is possibly easier for the Republicans to get done, they can do with 50 votes in the Senate. But the replace part is really where the

rubber is going to hit the road because to get that passed Trump and the Republicans are going to need some Democrats in the Senate and they are not

there now.

QUEST: Is there a danger very briefly, is there danger they repeal but don't get the replacement.

COLLINSON: Definitely, going into the midterm elections next year, the Democrats will be able to say, look, Republicans took away your healthcare

and didn't put anything in to replace it, and that is a very perilous position for the Republican Party to contemplate.

QUEST: Good to see you. Thank you, we'll talk more about it as this goes through.

Foreign investment is crawling back, stocks are up, the rally is gaining ground, and yet Brazil's economy is still not growing. We are going to be

in real where ordinary Brazilians are not feeling any signs of recovery. QUEST means business from New York.

[16:45:00] (COMMERCIAL BREAK)

QUEST: Two carnivals have come and gone in Brazil, it is still mired in its worst ever recession. The economy shrank 3.6 percent last year, there

are now 8 quarters of consecutive contraction, now there are a few signs of recovery so far it is not reaching any ordinary Brazilians.

Our correspondent Shasta Darlington is in Rio for us tonight, over the last three years you've been there and we've been talking about on-air, is there

any feeling that things are getting at least stable if not better?

SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT: It just depends on who you talk to, the problem is as you said regular Brazilians are not feeling

so if for decades there was this phenomenal growth, the government at that point like to point to all of these millions of people climbing out of

poverty into the lower middle class. It is those same people who are now falling back into it, and they are not feeling the relief yet. This is the

longest and worst recession on record, so, no, jobs are going up, unemployment hit a new record in January, 13 million people out of jobs.

However, consumer confidence and investor confidence are showing signs of ticking up. Auto sales also sort of turned around. And so, the current

president Michel Temer who of course replace Dilma Rousseff when she was impeached, says these are signs that the economy will now recover in 2017.

We have bottomed out. All of these policies that I am putting in place are beginning to work. The window here is of course very short, he has still

got to get through some very unpopular measures, specifically a pension reform. He needs Congress to help him with that and yet when you have

these economic figures coming out showing so far, this recession hasn't ended, that there haven't been any huge improvements, it is really going to

be hard to get people behind him. And that is what he is looking at going forward in the very short term.

QUEST: How much of the root of this crisis -- obviously, Brazil has a financial scandal as well concerning the oil company, but how much of this

economic malaise can be laid at the door of the political crisis?

DARLINGTON: Definitely, a good chunk of it. Obviously, this all started with the commodities crisis when China stopped buying as much iron ore as

it had been buying when the price of so many commodities especially oil started to tank. This had a huge impact. The deep-water reserves that

Brazil had been betting on in the long-term were no longer viable, they were too expensive to reach. But after we had the beginning of this

commodities crisis we saw a lot of mismanagement on the part of the former president really trying to boost consumer consumption at home when they

just didn't have the elasticity for that. Boosted inflation and that really brought with it a whole series of problems. And then she is accused

of course of trying to cover up these problems. And that is what her opposition used to try and get her out of office and they eventually

succeeded. But it really is a combination of global factors being against her and against Brazil. And mismanagement following that. The question is

whether or not they can now bring it all together, they do have on their side some improving commodities prices.

QUEST: We'll talk more about it as the season turns, good to see you, thank you, Shasta.

Two of the world's richest man are battling it out to dominate the next era of travel beyond our planet. Jeff Bezos has just signed one of Elon Musk's

clients as the new space race heats up.

[16:20:00] (COMMERCIAL BREAK)

QUEST: The battle for space between the billionaires, Jeff Bezos' rocket company, Blue Origin, has signed Frances; Eutelsat as his first customer,

to launch satellites into orbit. A move set up a battle between these two billionaires. Blue Origin and Elon Musk's SpaceX both use the same idea of

recycling rockets to dramatically lower the cost of space travel.

Now when it is ready for launch in 2020, this is a depiction somewhat earlier than 2020 of course, Blue Origin's new rocket will have about twice

the capacity of SpaceX's current rocket. Now Jeff Bezos says his goal is for humans to eventually work in space and preserve life on earth. Musk's

vision is to one day colonize Mars. All of which leads me wondering why these two very rich men have decided to go so much for space. We need

Miles O'Brien to help make sense of all of this. CNN's aviation and space analyst, he joins me from Austin, Texas.

Now, Musk is already launching, he has had a few hiccups but he is already ahead of the game with Bezos, isn't he?

MILES O'BRIEN, CNN AVIATION AND SPACE ANALYST: Yes, if you are judging this as a race no question that SpaceX, Elon Musk is ahead. Blue Origin

after all was founded in the year 2000, 17 years later Jeff Bezos has his first customer, after spending in excess of $500 million out of his own

pocket. Now that is for him shall we say chump change and something that he has passion over, but it is nice every now and then to have a customer.

QUEST: And it has taken that long to get Eutelsat, why has Eutelsat jumped literally spaceship?

O'BRIEN: Eutelsat likes to hedge their bets, they have bet on every launch platform over the years. They have 39 satellites in orbit right now,

geostationary communication satellites. It is always good to have a number of ways to get to orbit in case you have a little problem as we see

frequently in this business. It is after all rocket science, rockets do explode at times, and it is good to have another path to space.

QUEST: I talked about -- I'll take your brickbat and I will say yes, I would put it in terms of a race between these two men. And maybe a race is

putting it to strongly but a battle maybe. What is it that you know of these two men that they absolutely have got the bit between the teeth when

it comes to space?

O'BRIEN: You know, it's really interesting, it is hard to come up with a business model that really works in this business. Elon Musk has done

pretty well contracted to NASA and others putting satellites into orbit. Jeff Bezos has taken a little different technological approach, he hopes to

fly tourists pretty soon, maybe that will be like the early days of airmail and open up a whole new business there.

[16:55:00] But I think at the bottom of the ledger in both cases you have men with deep passion and commitment to this idea of a multi-planet

species. They both are looking toward Mars and I am going to make a statement here right now that you can check later, I suspect one of them

will be NASA to Mars down the road.

QUEST: Right. And Sir Richard Branson of course whose Galactic a terrible accident and tragedy, is he down and out?

O'BRIEN: No, I wouldn't say that but you have to remember that Sir Richard Branson has not focused anywhere beyond low Earth orbit, he is doing sub

orbital missions that is his plan for tourists alone, and is launching small satellites into space but has no capability of putting heavy payloads

into low Earth orbit or beyond. Both Bezos and Musk are aiming for just that, they have got their eyes on low Earth orbit, the moon and maybe one

day Mars.

QUEST: I will join you on a ticket Mr. O'Brien, you buy the ticket, I will buy the popcorn, how is that, sir?

O'BRIEN: Sounds like a good ride.

QUEST: Miles O'Brien joining us from Texas. We will have a Profitable Moment after the break

(COMMERCIAL BREAK)

QUEST: Elon Musk and Jeff Bezos, to ultra-rich men battling for space. I was reminded of the early pioneers, the entrepreneurs, those who were

prepared to spend big to make true achievements. Maybe we've got a new generation with space. And that is QUEST MEANS BUSINESS for tonight, I am

Richard Quest in New York, whatever you are up to in the hours ahead, I hope it is profitable. We will do it again tomorrow.

END