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NEWS STREAM

Credibility Crisis In The White House; Trump Allegedly Orders Pentagon To Reduce Troops In South Korea; North Korea To Release Three American Prisoners; U.S Warns China On Militarization On Artificial Islands. Hawaii Volcano Erupts; Pollen Problem Peaks In Japan; Blocked From Film Academy; World Headlines; Curtain Of Fire; CNN Freedom Project; Historic Phone Call; Angry Outbursts. Aired at 8-9a ET

Aired May 04, 2018 - 08:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[08:00:00] (COMMERCIAL BREAK)

KRISTIE LU STOUT, CNN ANCHOR: I'm Kristie Lu Stout in Hong Kong, and welcome to News Stream.

A crisis of credibility -- the White House struggles to keep a story straight thanks to Donald Trump's new lawyer.

Lava emergency. Hundreds of evacuations take place in Hawaii as a volcano erupts on the state's largest island.

And human trafficking in Hong Kong. The CNN Freedom Project shines a light on one of the city's dark spots.

Now, the presidency of Donald Trump has turn up plenty of surprises over the past few months but when you begin a news program with the words, the

president's porn star problem, it raises serious questions about credibility, questions that the White House is struggling to answer.

In fact, there is still no real clarity after Mr. Trump's attorney contradicted previous explanations about that $130,000 payment for - the

hush payment for Stormy Daniels' silence. Kaitlan Collins has the latest.

(BEGIN VIDEOTAPE)

KAITLAN COLLINS, CNN CORRESPONDENT (voice-over): Rudy Giuliani's revelation that President Trump reimbursed Michael Cohen for the hush money

given to porn actress Stormy Daniels just days before the election catching many in the White House off guard. One aide telling CNN Giuliani's

interview stunned and shocked the communications staff who were unaware he would disclose that bombshell.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: When did you specifically know that the president repaid Mr. Cohen for the 130,000? You personally.

SARAH HUCKABEE SANDERS, PRESS SECRETARY: The first awareness I had was during the interview last night.

(END VIDEO CLIP)

COLLINS (voice-over): Giuliani conceding that there was no way White House staffers would have be surprised by his remarks telling CNN, the president

is my client. I don't talk to them.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: So did you expect that Rudy Giuliani would talk about this payment tonight?

HOGAN GIDLEY, WHITE HOUSE DEPUTY PRESS SECRETARY: We had no idea the topics of the show obviously. I'm not a attorney. I just work at the White

House.

(END VIDEO CLIP)

COLLINS (voice-over): Two White House officials tell CNN the situation is now out of their control. Others noting that Giuliani and Mr. Trump have

their own conversations before Giuliani's cable news appearances, reinforcing the idea that the president is increasingly acting as his own

communications director. Press secretary Sarah Sanders struggling to explain the shifting story.

(BEGIN VIDEO CLIP)

JIM ACOSTA, CNN CHIEF WHITE HOUSE CORRESPONDENT: You said on March 7th there was no knowledge of any payments from the president and he's denied

all of these allegations. Were you lying to us at the time or were you in the dark?

SANDERS: The president has denied and continues to deny the underlying claim and again, I've given the best information I had at the time.

(END VIDEO CLIP)

COLLINS (voice-over): Sources say Giuliani also blindsided many of President Trump's other legal advisers who feared he was winging it and not

fully prepared. Some advisers speculating that the comments were blamed solely between Giuliani and President Trump who are long-time friends.

(BEGIN VIDEO CLIP)

RUDY GIULIANI, PRESIDENT TRUMP'S ATTORNEY: I have known Donald Trump for almost 30 years and he has created and accomplished great things.

(END VIDEO CLIP)

COLLINS (voice-over): One official tells CNN that Giuliani undermined the administration's defense strategy in both the Daniels case and the Mueller

probe. Giuliani continuing to insist that the payment wasn't a campaign finance violation.

(BEGIN VIDEO CLIP)

GIULIANI: It wasn't for the campaign.

UNIDENTIFIED MALE: Right.

GIULIANI: It was to save their - naturally marriage as much as their reputation.

(END VIDEO CLIP)

COLLINS (voice-over): But moments later, the president's lawyer appearing to undermine his own argument.

(BEGIN VIDEO CLIP)

GIULIANI: Imagine if that came out on October 15, 2016 in the middle of the, you know, last debate.

(END VIDEOTAPE)

STOUT: And that was CNN's Kaitlan Collins there. Now, despite assurances from President Trump and Rudy Giuliani, there's still no word if or when

three Americans held captive in North Korea will be released. Meanwhile, the "New York Times" reports that Mr. Trump has ordered the Pentagon to

draw up options for reducing the number of U.S. troops in South Korea.

But the president's national security adviser, John Bolton, is denying that report. Bolton is gearing up for Washington meeting shortly with South

Korea's security chief, all this ahead of Mr. Trump's highly anticipated sit down with North Korean leader Kim Jong-un. Nowhere yet on when that's

going to happen.

CNN's Alexandra Field has a lot to tell us now. She joins us now live from Seoul. Alex, we have this "New York Times" report saying that President

Trump has ordered the Pentagon to prepare options for drawing down U.S. troops in South Korea. Apparently, John Bolton is disputing that, but we

also know this is a White House that frequently contradicts itself. What are we to -- how are we going to -- how do we take up this all in?

[08:05:05]ALEXANDRA FIELD, CNN CORRESPONDENT: Well first, let's break apart that "New York Times" report. What they are saying is that the

president has asked the Pentagon for options of how you would draw down the number of forces on the Korean Peninsula. You've got some 30,000 U.S.

forces who are permanently stationed here. But that reporting from the "New York Times" does go on to say officials are saying that any draw down on

the number of troops here wouldn't be used as a negotiating chip with Kim Jong-un, that it wouldn't be tied to any kind of conditions for

denuclearization, which is of course going to be the topic of the summit between these two leaders.

Nevertheless, you do have some very (inaudible) denials at this moment coming from Washington, D.C. We'll start with what the national security

adviser has just said. He's been at this (inaudible) saying the "New York Times" story is utter nonsense. The president has not asked the Pentagon to

provide options for reducing American forces stationed in South Korea

Those are his words. He isn't the only one denying this. The Pentagon's chief spokeswoman has also said that she is not aware of the president

asking for any of the kinds of options that the "New York Times" has reported. He requested and you've got South Korea's national security

chief, who has traveled to Washington in order to meet with his counterparts there to talk about the upcoming summit between Trump and Kim

Jong-un.

He has also been told by officials in Washington that this report is not true. But certainly, the question has been raised widely because we are

talking about a scenario in which now North Korea and South Korea have said that they want to see a peace treaty that would bring to a formal end the

Korean War since 65 years after the fighting stopped. So that's raised the question for a lot of people, will the U.S. still need to have the kind of

presence that it does currently have here, Kristie.

STOUT: The report is out there. It has been disputed. It's raising a lot of questions. It also comes amid ongoing talks between the U.S. and South

Korea over that longstanding issue for President Trump, how to share the burden, to share the cost of the U.S. military presence on the peninsula.

Where do those talks standout?

FIELD: Right, the president has long talked about the level of troops that you've got in this part of the world. You'll remember, Kristie, we talked

about this often when President Trump was candidate Trump, to raise questions about the kind of defense spending that the U.S. was doing in

places like South Korea and places like Japan. In Japan you've got another 50,000 U.S. troops.

So, there were questions that were raised by the president at that time, but frankly, made people here in South Korea, made people in Japan nervous

about the U.S. commitment to their protection, to the defense of this part of the world. There were number of diplomatic over tryst (ph) from the

administration after that. They have high level dignitaries coming up to this side of the world re-affirming the strong allegiance with the allies

out here.

But certainly President Trump has always talked about the possibility of looking at and evaluating the troop levels here. Earlier this week, even

before this "New York Times" report broke, Kristie, you did have officials here in South Korea from the blue house coming out and defending the

presence of U.S. troops on the peninsula, saying that they aren't just about North Korea, saying that this isn't just about any potential peace

treaty that could be in the works, but the fact that you have U.S. troops out here is about the greater stability and peace of this region. So

certainly, they were defending the ongoing and continued presence of troops right here.

STOUT: And Alex, hearing so, you're also closely monitoring for any news about those three American detainees in North Korea. We're still waiting

for them to be released. You know, it must be such an anguishing limbo for their families.

FIELDS: Yes. It seems so terribly close. Just a day ago, you had President Trump himself talking about these three detainees, one of them who have

been held in North Korea since 2015, the other two since 2017. The president teased, stay tuned, and then almost bizarrely, his attorney, Rudy

Giuliani came out and said that all three men would be released on Thursday. Well, Thursday has come and Thursday has gone and still no word

on when these three prisoners could be released.

The White House and the State Department haven't been able to pin that down or say definitively that they will be released. They have only said that

certainly it would be a goodwill and a good faith gesture on behalf of North Korea to make this release happen before that summit between

President Trump and Kim Jong-un, but at this time, no one seems to know definitively when that can happen to go a step further.

The White House and State Department officials have both said they're trying to verify these reports that the three detainees have been moved

from the locations that they were being held in, brought to Pyongyang, which could be a sign of a possible release. Don't forget, we've been

talking about one source that it told CNN that this release would be imminent, but still it seems like at this point, just a day later, no one

can say exactly when this would happen. The families holding on to a lot of hope that this will happen soon, Kristie.

STOUT: Absolutely. Alexandra Field, we thank you for your reporting this day. Take care. China says it has made progress in trade talks with the

U.S., but there are still big differences that remain. Now, top officials from both sides just wrapped up two days of talks. Beijing and Washington

have threatened steep tariffs on tens of billions of dollars of each others exports. And according to China's state news agency, both sides agreed to

stay, in quote, close communication.

[08:10:00] This comes as Washington and Beijing trade sharp words over the disputed South China Sea. A U.S. intelligence says China deployed missiles

to three artificial islands recently. And China claims that all the islands within this line are part of its territory. The countries like the

Philippines and Vietnam also say that they own parts of the area.

The U.S. claims that those missiles were deployed to the disputed Spratly Islands located just west of the Philippines. And back in 2016, Beijing

announced it deployed similar weapons to the Paracel Islands located up there, east of Vietnam. They were place on Woody Island. This time the

White House says, there will be consequences.

(BEGIN VIDEO CLIP)

SANDERS: We're well aware of China's militarization of the South China Sea. We've raised concerns directly with the Chinese about this and there

will be near-term and long-term consequences.

(END VIDEO CLIP)

STOUT: All right, CNN's Matt Rivers has the reaction from Beijing for us, and Matt, we heard it from Sarah Huckabee Sanders there, there will be

consequences, but does tough talk from the White House work on China?

MATT RIVERS, CNN CORRESPONDENT: Well so far, it hasn't. And keep in mind, this is not the only time we've heard a U.S. administration talk tough and

say that what China is doing isn't right and is illegal. We heard that from the Obama administration as well, but nothing has really deterred the

Chinese from taking these systematic steps to really militarize these artificial islands that they've built up.

So when the White House under the Trump administration talks about we're going to take long -- there will be long and short-term consequences, what

do they mean there? I mean, they were talking about sanctions possibly, targeted at companies that are involved with the building up of these

artificial islands, one option maybe. The certainly probably going to continue the freedom of navigation operations that the Obama administration

did, the Trump administration has continued. That's where U.S. Navy ships sail nearby these artificial islands to dispute Chinese sovereignty claims,

territorial claims over them.

But beyond that, there is now out of good options here, Kristie, in terms of its -- the United States and you want China to take these missiles off

the islands, what do you do? You go to war with China over that? No, you're not going to do that. Ans so absent that, there's not a lot tools in

your tool kit here, according to most of the experts that we speak with, to force China to back down. If China wants to project its power in this way,

it seems like they're going to do so.

STOUT: There is not lot of options left so, has China already won in the South China Sea? Has its military build-up reached a point where there's no

turning back?

RIVERS: I mean, you could argue kind of like North Korea where you hear a lot of people say the time to stop the nuclear program would have been way

back in the '90s. I mean, you could have argued that the time to put tons of pressure on China and really push back was right in the beginning when

they first started building up these artificial islands even though President Xi Jinping himself in 2015 at the White House said China had no

plans to militarize them, and yet they keep doing it.

And now it's really unclear, you know, they've built runways, they built radar jamming stations. They have now put missiles there. Experts pretty

much agree that there will be fighter jets on deployments there at some point in the near future. It's a very high likely that that's going to

happen. How you stop China from doing that, you can continue to lodge your complaints, you can continue to do the freedom of navigation operations,

but if China seems determined to build up these islands and they've already put all this work into them, you don't really see a reason that they're

going stop any time soon.

STOUT: Matt Rivers, live in Beijing, thank you.

Now, we know that China is also putting pressure on Qantas for listing Taiwan, Hongkong and Macau as countries on its website with no mention of

China. The airline says it got a warning from China's civil aviation administration. China considers the self-governed Taiwan as part of its

territory. It's not just Qantas, you got (inaudibnle) here, U.S. airlines American and United. They also received letters recently. The U.S State

Department says it objects to Beijing dictating how American firms organize their websites.

It's not just airlines, though. Marriott's Chinese website was shut down for a week by Shanghai authorities after it also listed Taiwan and Tibet as

separate countries in a questionnaire. Marriott apologized for that controversy. And around the same time, Shanghai's internet authority

summoned representatives from Zara and chastised the company for listing Taiwan as a country.

Now, a volcano in Hawaii has authorities on edge. Not only is it spewing hot lava into neighborhoods, it' also releasing dangerous gases. We'll get

an update, next.

Plus, a crisis of Nobel prize proportions. A sex scandal engulfs the panel that decides who gets one of the world's most respected honors. We'll be

live in London with the latest on that.

[08:15:00] (COMMERCIAL BREAK)

KRISTIE LU STOUT, CNN NEWS STREAM SHOW HOST: Evacuations are underway in Hawaii where a volcanic eruption has sent lava streaming into residential

areas in the big island. This is a scene around the Kilauea volcano where authorities say they are detecting extremely high levels of dangerous

sulfur dioxide gas.

Seven hundred people have been ordered to evacuate and you can see why. This video shows hot lava flowing down the street. Hundreds of earthquakes

have also been reported. Some local people say that they have seen cracks opened up in the roads.

Let's get the latest on the situation there. Jennifer Gray joins me from the World Weather Center. Jennifer, wow, the video is stunning. Mount

Kilauea erupting, sending that oozing hot lava to neighborhoods. A warning thankfully has been issued. Evacuations ordered. How long will this danger

last?

JENNIFER GRAY, CNN WEATHER CORRESPONDENT: Well, that's the big question mark. We really don't know. The immediate threat from that actual eruption

is over, lasted about two hours. The lava flowed about 10 meters. But what we don't know is if there will be more eruptions and so that's why the

Hawaii civil defense is on site. We have scientists on site.

This volcano has been erupting continuously since January 1983, so it's no surprise that we've seen an eruption. What is weird though is that this is

happening in the middle of a residential area. That's what's bizarre about it. There have been 1,700

under evacuation order, as you mentioned, and two shelters are open for people to go.

So there is the volcano, there is Kilauea, that's the crater. Since Monday, we have had more than 200 earthquakes occur with the biggest one

being that 5.0, that was yesterday. Hours later, that's when we saw that eruption. So, the fissures open in the roads earlier this week due to the

earthquakes and down that's what we had that eruption.

So let's go to the Google Earth, and you can see what's happening. It's all happening on the big island. There is Kilauea right here. What happened was

on April 30th, that crater collapsed. And what happened was an intrusion. So that's basically instead of the lava flowing out, the magnet is going

underground. It's causing the earth to shift, rocks to shift, and that's what caused the earthquakes, and then you end up with these fissures and

that's where we saw the lava flows.

So that's why you're seeing it happen in this residential area about 20 miles from the actual crater, because that magma flowed underground, caused

the earthquakes, these fissures happened in the middle of this neighborhood, and that's where we saw the lava come out of the ground.

And so scientists are going to be watching it very, very carefully especially, Kristie, because it happened in the middle of a residential

area.

LU STOUT: Yeah, absolutely. Thanks for walking us through what happened. This crater collapsed, effectively sparking the state of emergency at

Hawaii's largest island. Jennifer Gray reporting for us, thank yo so much, take care.

[08:19:58] In India, authorities there are warning that five more days of storms are on the way. Already more than 100 people have died in

devastating dust storms in India early this week. Footage shows how the storm knocked out infrastructure, trapping people in rubble. Government

officials say that Agra was the worst affected city with more casualties expected to be found there in the next few days.

Most of us would agree that in any big city, it is nice to see some greenery once in a while. But decades ago in Japan, authorities planted so

many trees and Tokyo now has a major allergy problem because all the extra pollen. Anna Stewart reports the amount it's costing the economy is not

(INAUDIBLE).

(BEGIN VIDEOTAPE)

ANNA STEWART, CNN CORRESPONDENT (voice over): Surgical masks are a common sight in Tokyo, often worn to prevent spreading a cold, but at this time of

year, you see more than usual as people battle against hay fever.

This year is one of the worst. The pollen count has more than doubled from last year in some parts of the country. And in Tokyo, half the population

suffers from hay fever, according to a local government survey.

(on camera): After the Second World War, Japan started a major reforesting initiative. Unfortunately for hay fever sufferers, many of the trees

planted were cedar and cypress. Over the years, they matured and now many have hits that peak pollen-producing years. This year, hay fever is

expected to cost the Japanese economy $1.8 billion, according to the Dai- Ichi Life Research Institute.

TOSHIHIRO NAGAHAMA, CHIEF ECONOMIST, DAI-ICHI LIFE RESEARCH (through translator): Fewer people go out during a pollen outbreak which pushes down

consumption. And then the productivity of those suffering from hay fever also goes down. So it hits both demand and supply.

STEWART (voice over): Tokyo's local goverment has started cutting down and replacing trees with lower pollen varieties. It costs over $7 million each

year and it is going to take between one and 200 years to complete.

UNIDENTIFIED MALE (through translator): The trees don't just spread pollen, they also store water. And they prevent natural disasters like

landslides, and people enjoy that. So we want to act in the public interest as well as tackling hay fever.

STEWART (voice over): It is not all doom and gloom. Drug stores and pharma businesses can cash in on anti-hay fever drugs and of course the sales of

all those surgical masks.

Anna Stewart, CNN Money, Tokyo.

(END VIDEOTAPE)

LU STOUT: One of the world's most prestigious prizes will be awarded this year. This Nobel prize for literature is being postponed until 2019,

because of the sex abuse scandal engulfing the Swedish Academy. That institution is responsible for awarding the prize.

The scandal focuses on Jean-Claude Arnault. He is a photographer who faces multiple allegations of sexual assault and harassment. His wife is one of

six members of the academy who stepped down from their positions in recent weeks.

CNN's Erin McLaughlin is following the story for us. She joins me now live from London. Erin, what more have you learned about the sexual abuse

scandal that has postponed a Nobel prize?

ERIN MCLAUGHLIN, CNN INTERNATIONAL CORRESPONDENT: The scandal first come to light, Kristie, late last year with the height of the "Me Too" movement

and some 18 women came forward with allegations of sexual misconduct against Jean-Claude Arnault, who is seen as a cultural heavyweight there in

Sweden. He is also the husband of a member of the academy, Katarina Frostenson.

A law firm conducting an independent investigation not only found those allegations of sexual misconduct but also a financial scandal as well, that

investigation finding that the academy had inappropriately funded a cultural club belonging to Arnault as well as Frostenson.

So this is a scandal that has been playing out for months now, culminating most recently with a series of resignation of academy members. Frostenson

has resigned as well as the academy director.

In fact, so many academy members have resigned as a result of the scandal, that they do not have enough members to reach an actual quorum to be able

to vote to award the Nobel prize for literature, although something that that's not the point that even if they have enough members for a quorum

that the academy has been so badly tarnished as a result of the scandal that they should delay on awarding this year's prize to 2019, which is

exactly what they're doing.

Worth noting that other Nobel prize categories have not been affected by the scandal although this is the first time that a Nobel prize in

literature will not be awarded in a year since World War II, Kristie.

LU STOUT: No other Nobel prizes will be effective but still what happens next? What needs to take place to restore credibility in the Swedish

Academy and be the place where the next Nobel prize for literature can indeed be declared?

[08:24:59] MCLAUGHLIN: Some are calling for structural changes within the academy and the king himself in Sweden is taking steps in that direction,

most recently announcing that academy members will be able to resign.

That is significant because this is a change in a law that dates all the way back to 1786. Academy members normally elected for life. That looks

like it is going to change once that happened. There are many in Sweden calling for more women to be elected to the academy.

It was noting that since 1786, there have been only nine women as members of the academy. Three of those women have most recently resigned. A lot of

people in Sweden want to see that change. They also want to see the academy being more transparent especially when it comes to its financial dealings,

Kristie?

LU STOUT: Erin McLaughlin live in London for us, thank you.

Roman Polanski and Bill Cosby have been booted from the Academy of Motion Picture Arts and Sciences known for (ph) for handing out the Oscar awards.

They voted to expel both men, setting conduct standards.

Film director Polanski fled the U.S. back in 1978 after being charged with statutory rape of a 13-year-old girl. Cosby was found guilty last week on

three counts of aggravated indecent assault in the wake of the "Me Too" movement.

The academy had been criticized for expelling disgraced producer Harvey Weinstein but not responding to accusation against these other two men.

Human trafficking is a global problem and a look (ph) at one of many places including Hong Kong, we have one woman's tragic story and we will speak to

an anti-trafficking expert later in the program.

(COMMERCIAL BREAK)

LU STOUT: I'm Kristie Lu Stout in Hong Kong. You're watching "News Stream" and these your world headlines.

The White House is struggling to provide clarity after Donald Trump's new attorney contradicted previous explanations about payments made to a porn

star. The president admitted to reimbursing his personal attorney, Michael Cohen, $130,000 for hush money to Stormy Daniels.

The U.S. is warning Beijing there will be consequences for China over its militarization on the disputed South China Sea. China's foreign minister

responded a short time ago. A spokesman was saying that the U.S. should think about the consequence of its own military deployment in the region.

China says it is only pursuing peaceful construction activities on islands in the disputed area.

An erupting volcano has sent lava flowing into residential areas in Hawaii's big island. About 1,700 people living near the Kilauea volcano

have been told to leave with lava seen burning through these trees.

[08:30:04]

The Fire Department says high levels of dangerous sulfur dioxide gas are present in the area being evacuated.

Human trafficking as you know is a massive global problem and may be happening in places you least expected. According to the International

Labor Organization, there are at least 24.9 million people in forced labour around the world. And that's supported by traffickers who make profits of

around $150 billion a year.

Human trafficking can include recruiting, transporting or receipting a person through forced coercion or other means to exploit them. That's under

the U.N. definition. And some places do a better job stopping it than others which is assessed by the U.S. State Department's annual Trafficking

In Persons Report.

But one of the world's wealthiest cities, Hong Kong, is not berated when it comes to preventing human trafficking. As part of CNN's Freedom Project,

Anna Coren has a story of one woman who has lived the nightmare.

(BEGIN VIDEOTAPE)

ANNA COREN, CNN INTERNATIONAL CORRESPONDENT (voice over): Through a nondescript gate off a busy Hong Kong street is a place called Destine

House (ph). It's basic cramped and exposed to the elements, but it's the only sanctuary thousands of domestic helpers have ever know, who suffered

abuse and exploitation at the hands of their employers.

Twenty-eight-year-old Atik who wants to hide identity for safety reasons arrived from Indonesia in 2012 with the promise of a good paying job by an

employment agency.

They told me Hong Kong is a place to earn more money and achieve your dreams, she said. So I came here hoping to save enough money to one day

build a home and support my son's education. Instead, Atik says her female employer deceived her.

She claims the woman took her passport, made her work seven days a week, 20 hours a day. Physically and psychologically abused her, threatened to have

her deported if she didn't resign her contract, and to top it off, refused to pay her salary.

"My employer said if I completed my five-year contract, she would give me a bonus pay. That's why I put up with the mistreatment, but it was all a

lie."

After almost five years, Atik claims her employer paid her a total of $1,500, five percent of what Atik says she was contractually owed. And it

wasn't until a particularly harsh beating when she was punched in the face and kicked when Atik said she finally gathered the courage to escape.

ENI LESTARI, CHAIRWOMAN, INTERNATIONAL MIGRANTS ALLIANCE: The experience of Atik is actually also experience of many domestic workers in the city.

The fact is that this has continued to happen again and again. It is quite alarming.

COREN (voice over): Atik is one of the 350,000 foreign domestic workers living in Hong Kong, and it's estimated that one in six is a victim of

labor exploitation, according to a 2016 NGO report. And while Hong Kong prides itself as one of the wealthiest and most sophisticated cities in the

world, one activist speaking to CNN called its track record on human trafficking appalling.

(on camera): The U.S. State Department's annual Trafficking In Persons Report last year placed Hong Kong on the tier two watch list for the second

consecutive year, on par with countries like Iraq, Bangladesh, and Rwanda.

And unless it makes some drastic changes, it's at risk of dropping even further down the list, joining the likes of North Korea, Sudan, and the

Congo as the worst offenders of human trafficking.

DENNIS KWOK, MEMBER, HONG KONG LEGISLATIVE COUNCIL: We don't want to be placed on the same level as African, some African states or North Korea,

who doesn't even come close to acknowledging human trafficking as an issue. We don't want to be associated with that. So that's why I think the Hong

Kong government and the legislative council in Hong Kong needs to positively make the change.

COREN (voice over): Hong Kong Legislative Council's Dennis Kwok has proposed a bill based on the U.K. and Australian model to create a law that

would combat all forms of human trafficking. And while Hong Kong claims that it is fighting the problem, Mr. Kwok believes the government which

drafted a national action plan to combat trafficking five years ago, is still dragging its feet.

KWOK: This is not just about Hong Kong. If we don't have laws that adhere to tackle international human trafficking, we're actually affecting the

rest of the region or the rest of the world.

COREN (voice over): As for Atik, her fight to justice lies with the courts. Her employer has been charged with assault and is yet to enter a

plea.

[08:35:00] But as long as this court case drags on, Atik must legally stay in Hong Kong, when all she wants is to return home and wrap her arms around

her son who she hasn't seen in more than five years.

Anna Coren, CNN, Hong Kong.

(END VIDEOTAPE)

LU STOUT: Archana Kotecha is the head of Legal Liberty Asia and anti-human trafficking activist here in Hong Kong. She joins me now for more on the

story. Thank you so much for being here on the program.

Why is it that according to the U.S. State Department's Trafficking In Persons Report that Hong Kong is such an offender. It is a level tier two

offender on par with countries like Iraq, Afghanistan. What has happened here?

ARCHANA KOTECHA, HEAD, LEGAL LIBERTY ASIA: The issue is that like many other cities and countries in this region, Hong Kong relied very heavily on

cheap unskilled migrant labor. So construction workers who come from mainland China but also migrant care workers who care for the elderly and

of course the most visible population, domestic workers, ranking about 371,000 in Hong Kong and currently.

But on top of this, we also have a very large population of transient sex workers, people who are moving in and out of Hong Kong. We have refugees

and asylum seekers. So there are very large pockets of vulnerable population and one of the reasons why Hong Kong has really been classified

as an offender is because of the lack of a comprehensive legislation and acknowledgment that human trafficking might be a problem in Hong Kong.

LU STOUT: Do you think that's a sign that the Hong Kong government has been in denial that human trafficking is a problem here?

KOTECHA: I think we are over the denial phase to a certain extent because there have been some positive measures in the last two years. And we can

definitely see a shift in attitude and a shift in the tone in terms of looking at this issue. Let's remember, not a single country globally is

immune to the problem of human trafficking and modern day slavery.

So we've seen very recently, you know, just to recap, an action from the Hong Kong government on tackling this issue of modern day slavery amongst

domestic workers and other vulnerable population with various measures put in by law enforcement to screen victims better. If you ask me the question,

is it enough? Are we doing enough? We are not.

LU STOUT: We do have this bill that is being introduced to offer better protection for migrant workers and domestic helpers in Hong Kong as well as

to fight human trafficking. Is this a significant first step forward?

KOTECHA: The attention that has been brought to this issue by the bill and this is the proposed bill by Dennis Kwok. And if you ask me again is this

bill -- the bill, does it answer all the questions? No, it doesn't. It's an approach.

LU STOUT: Yeah.

KOTECHA: But what it does do is it polarizes and focuses conversation and attention on this issue. One thing that as a member of civil society and as

you know, a representative of the civil society community generally, I would like to say that we want to see the voices of victims represented in

this bill. There is plenty more that can be done on that front and more that should be done to have the voices of victims represented.

LU STOUT: More should be done on this issue that is actually not happening here in Hong Kong. But what is at stake here if that momentum stutters out?

We know that Hong Kong is this glittering cosmopolitan wealthy city. Does it risk even falling further in the TIP report to rank among countries like

North Korea in terms of human trafficking?

KOTECHA: We are talking about the pillar of society that often remained unacknowledged. Whether they are construction workers, whether they are

migrant care workers or whether they are domestic workers.

So first and foremost, they are counting on us to do this. We owe it to them to do it. So the biggest fallout will be the consequences they would

face if things continue and don't improve from where they are right now.

The second fallout is, you know, this is a glittering city. Hong Kong is one of the leading financial centers in this part of the world and globally

in fact. And a lot of the accounts that are tainted by slavery are crossbite (ph) in this part of the world. And let's not forget that the

vast majority of slavery globally happens in this part of the world, in Asia.

So there is a big responsibility on regulators and in Hong Kong, in the region, and also on our banks and financial institutions to be taking the

right steps to ensure that they are identifying proceeds that come from this claim.

LU STOUT: Yes, there are multiple fronts against to fight --

KOTECHA: Absolutely.

LU STOUT: Thank you so much for joining us. Take care.

We had reached out to the Hong Kong government but they are yet to respond. You can see more stories on the fight against modern day slavery on our

Freedom Project website including that report on child labor and the cobalt trade in the DRC. You can find it at CNN.com/FreedomProject. We'll be right

back.

[08:40:00] (COMMERCIAL BREAK)

LU STOUT: The Japanese prime minister, Shinzo Abe, and President Xi Jinping, we just learned this, these two leaders just spoke over the phone

about North Korea. This is the first time these two have spoken over the phone. Mr. Abe said that this means that Japan-China relations are really

improving. It is that they both value the fact that, quote, complete denuclearization was included in the recent inter-Korean talks.

Now, first, it was -- we all remember the story -- was the rage against macadamia nuts but now it (INAUDIBLE) to the face like the daughters of

Korean Air Chairman Cho Yang-ho by making headlines again for their temper. South Korean police said that they requested an arrest sworn on charges of

assault and obstruction of business for Cho Hyun-min.

Cho is the younger sister of the infamous nut rage heiress. She is being investigated over accusation that she hold her drink at people during a

business meeting last month. Her elder sister served just five months of her one-year prison sentence over her tantrum. Korean Air employees are now

calling for their father to resign his position as CEO after his daughter shenanigans.

OK, now let's go back to that story that we just got in. The leaders of Japan and China speaking to each other on the phone, the first time in

history, over the issue of North Korea. We got Matt Rivers on the line from Beijing on this. Matt, this is incredible. Because of North Korea, these

two leaders have just spoken to each other on the phone and making history in the process.

RIVERS: It's a big deal, there is no doubt about it. People don't remember or at least in the modern context, they don't remember the amount of

animosity historically between China and Japan that goes all the way back to the days of World War II.

You're here in China, it's called the war of Japanese aggression and the Japanese troops did horrific things in Manchuria in China and that is not

lost on the Chinese public and that has lingered for decades and decades and decades. There is extreme animosity.

I mean even if you watch today, if you were to watch soap operas here in China on state media during the day, a lot of them are actually about

Chinese forces standing up against the Japanese imperialist as they're called during those days.

And yet here we are. I mean that was decades and decades ago. The animosity still exits for sure but there are pressing issues right now, not the least

of which would be North Korea. And historically, China and Japan had also been on the opposite side of that coin. China, a major ally of North Korea.

Japan usually taking a harder line. So this is a major step here, Kristie, prompted by an unprecedented situation.

LU STOUT: Matt Rivers reporting live from Beijing. That's breaking news. These two leaders that we just learned having this historic phone call

because they are to discuss the North Korean crisis.

That is "News Stream." I'm Kristie Lu Stout. Keep it here, don't go anywhere. We got "World Sport" with Christina Macfarlane, coming up next.

(COMMERCIAL BREAK)

[08:45:00] (WORLD SPORT)

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